Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — SOCIAL SECURITY

The Secretary of State was asked—

Disability-related Benefits

Mr. Elfyn Llwyd: How many meetings she has had in the past three months to discuss disability-related benefits with organisations representing the disabled; and if she will make a statement. [38475]

The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham): During the past three months, my ministerial colleagues and I have met on 10 occasions with national organisations and umbrella groups representing people with disabilities.

Mr. Llwyd: I welcome the belated conversion of the Secretary of State and her Ministers to engaging in reasonable dialogue with disability groups. In the light of the admission by Ministers and civil servants to the recent Social Security Committee that there had been some bad errors of judgment in respect of decisions on the benefit

integrity project, will the Secretary of State confirm that every single decision involving the withdrawal or lowering of benefits before 9 February will now be reviewed?

Mr. Denham: Yes.

Madam Speaker: I call Mr. Duncan Smith.

Mr. Iain Duncan Smith: rose—

Mr. Denham: rose—

Mr. Duncan Smith: I have not asked a question yet. Perhaps the Minister would like to hear it before answering. During his meetings with various disability groups, was the subject of taxing disability living allowance raised and, if so, what was his opinion as to what should happen?

Mr. Denham: A wide variety of topics were discussed at those meetings. The hon. Gentleman will have seen that there is no such proposal in the welfare reform Green Paper.

New Deal (Disabled People)

Mr. Mark Oaten: What estimate she has made of the number of people with disabilities who will be helped back to work as a result of the new deal programme. [38477]

The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman): The new deal for the long-term sick and disabled aims to help the 1 million disabled people who are not in work, but who want to work.

Mr. Oaten: Does the Secretary of State agree with me and many disability groups that the £195 million allocated to the project is not enough to get disabled people back


to work? Does she accept that, although the numbers involved vary greatly, on average just £100 per disabled person will be made available? Will she give the House a commitment that if the project fails to get people back to work, in a year's time she will allocate more resources so that more disabled people can return to the work force?

Ms Harman: I welcome the hon. Gentleman's support for the aim of trying to help people with disabilities back to work. The £195 million that has been allocated is intended not to help all disabled people back to work, but to finance pilot projects to ascertain what works best to help people with disabilities or health problems get into work and stay there. However, I can give the hon. Gentleman and the House the undertaking that, when we find out what works, we shall roll it out nationally. It is seedcorn money for pump priming and its purpose is to find out what will work with a view to making it national.

Mr. Malcolm Wicks: Does my right hon. Friend agree that we must be ambitious about the programme? In the borough of Croydon, people with serious learning difficulties, including young women with Down's syndrome, have been successfully placed in employment. Does my right hon. Friend agree also that we must consider the poverty traps that can affect people with disabilities, particularly those in residential care? Will her Department study the particular poverty traps facing people with severe learning difficulties who want to re-enter work?

Ms Harman: I thank my hon. Friend for making that point. We should be ambitious about the opportunities for people with learning and other disabilities to work when they want to do so. It is not good enough for us to write people off and not consider their capabilities and abilities. The Keyring project in my constituency helps people with learning disabilities to do what they consider an important job. The Shaw trust also provides a number of projects, as does Mencap, to help people with learning difficulties have the shape, self-respect and dignity of work in their lives. At present, the benefits system traps people with health or disability problems out of the labour market. In the Social Security Bill, we are taking powers to strip away the benefit disincentive and recognise, as we do for people on the jobseeker's allowance, the ambitions of people on incapacity benefit to work.

Mr. Nick Gibb: When the Minister for Welfare Reform came before the Social Security Committee a couple of weeks ago—he came on his own on that occasion, which may, in retrospect, have been a mistake—he said that the Department of Social Security was conducting a survey into the incomes of recipients of disability living allowance. The Minister said that the reason for the survey was to assess whether it was worth while taxing DLA. Does the right hon. Lady agree with that approach? What is her opinion about whether DLA should be taxed?

Ms Harman: The hon. Gentleman is not engaging in the constructive opposition that we should like to see, as some hon. Members are. My right hon. Friend the Minister of State is being completely misquoted—he did not say that we were considering taxing DLA; he said that we needed the fullest information about people on benefits and their income levels. That is our responsibility, and one which we are discharging.

Mr. Dennis Skinner: Is my right hon. Friend aware that, for many years, there has been a system of providing welfare to work for disabled people, known as Remploy? During the 18 years of Tory Government, I went on marches with those disabled people round towns such as Alfreton, in an effort to prevent the Tory Government from closing Remploy factories. I suggest that, in her review, my right hon. Friend considers building more Remploy factories in other parts of Britain. There is no doubt that they work, and disabled people like to attend.

Ms Harman: I pay tribute to Remploy. In the years when the previous Government were not interested in concerns about opportunities for people with disabilities to work, Remploy carried forward that flag and provided much-needed opportunities. We are determined to build on the good work of Remploy. With the new deal for long-term sick and disabled people, Remploy's work will be to provide new challenges for people with disabilities.

Mr. Iain Duncan Smith: Given that the right hon. Lady has talked a great deal about what the Government are planning to do to bring disabled people back into work, and in the light of her comment about constructive opposition, will she tell us whether, given the new deal plans, she will be measured by whether unemployment among disabled people is lower at the end of this Parliament than it was at the beginning?

Ms Harman: We want to be judged on the success of our programme to help people with disabilities tackle the barriers between them and the world of work, so the answer to the hon. Gentleman's question is yes. We have four ways of dealing with that: first, active help to get people into work through the pilot projects that we have announced; secondly, removing discrimination in the benefits system against people on incapacity benefit; thirdly, the disabled persons tax credit, which will help to make work pay for people with disabilities; and fourthly, making the workplace disability friendly. Through that package of four thrusts of policy change, a greater percentage of people with disabilities will go into the world of work. Obviously, we must aim for a greater percentage because the figure will depend on how many disabled people there are.

Income Support

Mr. Richard Burden: What assessment she makes of housing costs in setting levels of income support. [38479]

The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley): Help with housing costs for people receiving income support is given through specific allowances within income support, mainly for mortgage interest, and through housing benefit and council tax benefit. Those are assessed according to the circumstances of the individual concerned. Housing costs are not met through personal allowances and premiums within income support, and are thus not taken into account in setting the levels of those payments.

Mr. Burden: I thank my hon. Friend for that reply. I have been corresponding with him over the past few months concerning the non-dependant deduction rule whereby, if tenants in receipt of housing benefit have someone come to stay with them who does not qualify for housing benefit but is in receipt of income support, they could stand to have their housing benefit reduced by up to £7 a week. That is an anomaly; it implies that the personal element of income support contains an element for rent, which it does not. That can increase poverty among many of the families affected. Will my hon. Friend re-examine the interrelationship between housing benefit regulations and income support regulations, with regard to that particular rule?

Mr. Bradley: I am grateful to my hon. Friend for again raising that matter with me. As he rightly says, he has been in lengthy correspondence with the Department on the matter, and I assure him yet again today that the interrelationship between income support and housing benefit will be reviewed in the light of our general review of housing benefit and housing policy. I assure him that the matter that he has brought to my attention will be included in that review.

Mr. Archy Kirkwood: In the spirit of constructive opposition, and on behalf—I guess—of the whole House, I acknowledge the Government's positive work on welfare to work generally. After the introduction of the working families tax credit, housing benefit, as currently constructed, will be the biggest obstacle to getting people off benefit and into work. The Minister said that there is a benefits review. When will the housing benefit review be completed? Will he give a guarantee that housing benefit will be reformed before the working families tax credit is introduced?

Mr. Bradley: I am grateful for the hon. Gentleman's constructive contribution. He is absolutely right to say that housing costs represent a significant barrier to a successful return to work under the welfare-to-work programme. I assure him that further work is continuing as fast as possible to ensure that we investigate clearly the implications of that barrier and the way in which housing benefit is structured. As soon as we have completed that analysis, we shall feed it through the housing review so that it is harmonised with other reform programmes, especially welfare to work, to ensure that any impediment to people moving successfully from welfare into the workplace is removed.

Mr. Dale Campbell-Savours: Are controls or further restrictions on rents in the private and voluntary sectors being considered as part of the housing and social security reviews? If they are not, tenants will be further punished at the end of the exercise.

Mr. Bradley: The review that we are undertaking is, as my hon. Friend is well aware, a joint review with the Department of the Environment, Transport and the Regions. I assure him that all aspects of housing benefit, and crucially the interrelationship between housing benefit and housing policy, will be considered. That obviously includes the level of rents. I assure him that his point will be brought to the attention of the review.

Poor Pensioners

Mrs. Betty Williams: If she will make a statement on Government actions to assist the poorest pensioners during the last year. [38481]

The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman): We have taken steps to help today's poorest pensioners, and want to ensure that all pensioners share fairly in rising national prosperity. Our pensions review is looking at how we can meet that objective.

Mrs. Williams: My right hon. Friend will be aware of the plight of pensioners and the problems that they face. I am sure that she is also aware of unnecessary worry caused to them by some inaccurate press reports, particularly over Christmas. Will she confirm that the basic state pension will remain the bedrock of future pension provision under this Government?

Ms Harman: I am happy to give my hon. Friend that assurance. The basic state pension will remain the foundation of income in retirement. We promised that in our manifesto; that is yet another of the promises that we are keeping. We also said that we would uprate the basic state pension at least in line with prices—and we have kept that promise, too. We have gone further than that to help pensioners with their income. We have cut VAT on gas and electricity, helped all pensioners with the cost of their winter fuel and, in particular, given extra to the poorest pensioners on income support. I know that one of the reasons why my hon. Friend is concerned about the matter is that about 80 per cent. of the poorest pensioners are women. She has been very concerned about that, in her constituency and in Wales.

Sir Sydney Chapman: The right hon. Lady has talked about the reduction in the cost of domestic fuel. Will she confirm that poorer pensioners—indeed, all people—have received far more help not so much from the reduction in VAT on domestic fuel, which I reckon to be in the order of a third of 8 per cent., but from the significant decreases in gas and electricity prices since the privatisation of those industries?

Ms Harman: With the abolition of the gas levy, we have reduced costs even further. I should expect someone who wanted to increase VAT on gas and electricity to 17.5 per cent.—as the hon. Gentleman did—simply to brush to one side the problem many pensioners have with paying their fuel bills. One of the big problems is not fuel bills, but pensioners not having enough money in their pockets—even money to which they are entitled. As you will know from your work with your constituents, Madam Speaker, many pensioners who are entitled to income support do not claim it because they find the 35-page form too complicated, or because they are too proud to fill it in. We are also making progress in helping pensioners with their costs by ensuring that, at the very least, they get the income to which they are entitled.

Ms Claire Ward: Does my right hon. Friend agree that, although she has outlined important measures, many pensioners in this country, and in my constituency in particular, are concerned about the basic state pension


and want security now, and not just in the future, because they are living from day to day? When will the pensions review be completed? Will it provide for pensioners today, and not just for those of tomorrow?

Ms Harman: I set up the pensions review—a manifesto promise—in July, and it has been proceeding. The voice of pensioners has been at the heart of the review, and we have consulted with Jack Jones of the National Pensioners Convention and many other pensioners' organisations.
I am happy to confirm that today's pensioners are never off our agenda. We are not only keeping our commitment to uprating the state pension, but are looking at other ways in which we can help pensioners make ends meet. We are concerned about today's pensioners, and we reaffirm our commitment to the basic state pension. For the future, we want to be sure that people do not retire into poverty—as too many have done—when retirement means having to ask for benefits, rather than simply receiving the good pension to which everyone is entitled.

Mr. David Rendel: The Secretary of State said that a number of pensioners are not claiming the income support to which they are entitled. Does that number include a large number of our most elderly pensioners? Would not the best way to help the poorest pensioners be to take up the suggestion of my hon. Friend the Member for Northavon (Mr. Webb) that an extra amount should be paid to the most elderly pensioners—those over 75, perhaps? Will the hints that we have been given by Ministers that the Government have this in mind come to fruition; if so, when?

Ms Harman: The hon. Member for Northavon (Mr. Webb) has played an important part and has made constructive proposals about how we can best target our help at those who need it most without giving people a sense of stigmatisation. The issue of the oldest pensioners—those who did not have a good occupational pension, or whose occupational pension has run out—is a problem which we are bearing in mind in our research project. We have set up nine pilot projects to discover which pensioners are not claiming their income support and how we can best get help to them. Focusing extra help on people when they reach a certain age is very much on the agenda.
Having looked at the 35-page form which pensioners of all ages are required to fill in to receive income support, I am amazed that as many as 1.5 million pensioners do claim income support. It should not be a case of asking people to put out their hands to prove that they are poor. Retired people feel that they are entitled to a decent income and that they should not have to prove that they are poor to get a decent standard of living. That is why we have the pilot projects; to get more automatic help to the poorest pensioners.

Ms Diane Abbott: The Secretary of State has acknowledged the low take-up by some of the poorest pensioners of income support to which they are entitled. Does that not illustrate the problems of means-testing in the welfare system; not only do many people who need extra money not get it,

but it encourages fraud and stigmatisation? Should we not be moving away from means-testing in the benefits system?

Ms Harman: We should be moving away from stigmatisation. People will not claim what they are entitled to if they feel that that will be embarrassing or humiliating and that they will have to go through hurdles and hoops. We are considering more automatic ways—which would avoid the stigmatisation of the means test—in which to help the poorest pensioners.
The Benefits Agency, the Contributions Agency, local authorities and the Department of Social Security have much data about people, but we have never put them together to ask how we can help the poorest pensioners. Using information technology and all the data that are stored, we can ask who is falling through the net and how we can help them without making them feel stigmatised. People should be entitled to the payments automatically; they should not have to jump all the hurdles. We may be able to achieve the objective, which I share with my hon. Friend, of getting more help to the poorest pensioners without stigmatising them.

Mr. John Swinney: In response to the question asked by the hon. Member for Watford (Ms Ward), the Secretary of State said that the needs of today's pensioners were never far from her mind. Did her Department make any representations to the Treasury before the March Budget to increase the basic state pension beyond the commitment to link it with prices?

Ms Harman: Hardly a day—no, an hour—passes without my Department making representations to, and holding discussions with, the Treasury.

Mr. Phil Hope: When the Green Paper on pensions reform is published, will there be the widest possible consultation on its findings? When the Government took office nearly a year ago, they discovered that 1 million pensioners had been abandoned—they were not claiming their pensions—by the previous Government, who had failed to provide a decent pension. Taking into account the cut in VAT on fuel and the extra winter fuel payments, have we not done more in the past 12 months than the previous Administration did in 18 years?

Ms Harman: We have already received 2,000 responses to the pensions review, which will be drawn together in a Green Paper. The publication of that Green Paper will signal an important round of consultation, which we intend to hold with hon. Members from both sides of the House and organisations outside the House.
Pensions reform cannot be done on the back of an envelope—it is a long-term issue. One of the problems that we inherited was that pensioners felt insecure—today's pensioners feel insecure and, because of the pensions mis-selling scandal, people who are still at work feel uncertain that their pensions will be sufficient to help them in retirement. We shall welcome constructive proposals from all sides, and consultation will be as full as possible, so that we can arrive at a proper settlement for welfare reform on pensions.

Mr. Iain Duncan Smith: Given the right hon. Lady's comments on income


support, measuring poverty and the means test, will she now—finally—take this opportunity to say whether the Government will means-test the basic state pension, regardless of whether it is universal?

Ms Harman: We said in our manifesto that the basic state pension would remain universal—it would remain the foundation of income in retirement for all. Therefore, it will be not means-tested, but uprated at least in line with prices. The hon. Gentleman constantly creates scares. Pensioners lost out by up to £20 a week as a result of the way in which Conservatives treated the basic state pension. We want to tackle the legacy of poverty and inequality.

Mr. Duncan Smith: Given that answer, will the right hon. Lady say whether she agrees with the Minister for Welfare Reform, who said, as recently as last week, that the attempts of Labour Members before and after the election to link poverty to take-up figures for income support were "cheap and futile"? Does she believe that she falls into that category?

Ms Harman: My right hon. Friend the Minister for Welfare Reform said neither thing. In his work on the Select Committee on Social Security when he was in opposition, he pointed out the number of pensioners who were falling through the net—we, too, highlighted that when we were in opposition. We shall proceed by ensuring a universal basic state pension and focusing more help on the poorest in retirement—that is what people think fair.

Good Parenting

Mr. Alan W. Williams: What initiatives her Department is taking to promote good parenting. [38484]

The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman): One of the key issues for parents, both mothers and fathers, is balancing work and family responsibilities, so family-friendly employment is a top priority for the Government. We are already taking action to provide high-quality child care for all families, and we shall ensure that parents can take time off from paid work to spend with their children.

Mr. Williams: The Government's rhetoric over the past few months has concerned lone parents who work, but does the Secretary of State accept that, in many couples with children, one parent, usually the mother, gives up work to look after them, and that those responsibilities fall doubly heavily when there is only one parent? Can she reassure me that the Government are fully supportive of couples in which one parent devotes the whole of her—it is usually her—time to looking after children and the family home?

Ms Harman: I can certainly give my hon. Friend that reassurance. We want to offer lone parents, and indeed all parents, more opportunities to work. One of the problems was that, although married women, who are not trapped in the benefits system, are able to return to work, particularly after the youngest child has started school,

lone parents are often trapped into remaining on benefit, even though many have not been receiving any income from the father and have wanted to go back to work to increase the income for their children.
There is no question of our trying to compel women to do the best for their children by going out to work rather than staying at home. We want them to be able to decide what is best for their children, and we shall back them in whatever choice they make. In the past, they have not had sufficient choice.

Miss Anne McIntosh: Is the Secretary of State saying that she has no plans to introduce any element of compulsion whatever? Is she aware that her ministerial colleague, the hon. Member for Manchester, Withington (Mr. Bradley), said in a written answer on Friday that there were no figures for the control areas of the pilot scheme for lone parents? Is it sensible to proceed without having tested the figures, and on what basis do the Government plan to proceed in those circumstances?

Ms Harman: The hon. Lady raises two points. On the first, the new deal for lone parents is entirely voluntary. The previous Government simply said, "Stay on income support until your youngest child is 16. We don't assume that you've got any interest in going back to work and we're not going to give you any help." Our policy is to extend help to get lone parents into work and to provide child care so that, particularly once the youngest child is of school age, they can return to employment.
The second point concerns the evaluation of the new deal for lone parents. We have spent the best part of £1 million on an independent academic evaluation. The very choice of the eight areas in which we piloted the new deal was made so that we could match them with eight other areas where there was no new deal. The hon. Lady can look forward to the results of that academic evaluation later in May. We can measure the success of the new deal, and we have done so. I am sure that the results will be very encouraging for all those who are concerned that lone parents and their children should have a better standard of living.

Unemployed Home Buyers

Mr. Steve Webb: What is her Department's long-term policy on the involvement of the state in funding the mortgage costs of unemployed home buyers. [38485]

The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley): We made it clear in the Green Paper on welfare reform that we are working with the industry to provide better protection for all home buyers, including the unemployed. We aim to develop a sustainable policy, in line with the eight principles underpinning the Government's approach to welfare reform. We shall consider state involvement in the provision of help with mortgage costs as work on reforms proceeds.

Mr. Webb: Is the Minister aware that the Minister for Welfare Reform said to me a month ago that the best form of protection for all home buyers is private insurance? Does he agree that that is a mistaken view, that there are many people for whom private insurance is not


appropriate and whom private insurers would not touch with a barge pole, and that there needs to be a continuing role for the state?

Mr. Bradley: There is an awful lot of quoting, or rather misquoting, going on today, which we shall examine carefully. Let me make it absolutely clear that we are working with the industry to ensure that products that are appropriate to meet the needs of people to protect their homes, and to protect themselves in their home ownership, will continue. We shall introduce proposals in line with that work as our welfare reform programme unfolds.

Mr. Peter L. Pike: Does my hon. Friend accept that, in the short term, people still have problems under the present system, which often does not provide the correct range of interest because of standardisation and the fact that the standardisation update follows some time after a mortgage rate increase? Another problem which still exists is that we pay the benefit four-weekly, whereas most mortgage interest is paid on a monthly basis, making it difficult to calculate whether the correct payments are received.

Mr. Bradley: I understand the concerns of my hon. Friend and many others. The difficulty is in managing the complex administrative procedures and ensuring that people get help and support with mortgage housing costs. I am pleased to be able to tell my hon. Friend that the standard interest rate will increase from 7.97 to 8.34 per cent. from 24 May.

Social Security Tribunals

Helen Jones: What plans she has to reform the system of social security tribunals. [38486]

The Minister for Welfare Reform (Mr. Frank Field): Our plans are detailed in the Social Security Bill.

Helen Jones: I thank my right hon. Friend for that reply. Does he agree that the present system imposes totally unacceptable delays on people? I shall give two examples from my constituency. One constituent lodged an appeal on 20 January and is still waiting to hear something. In an even worse case, an appeal was lodged on 8 July last year and was not even acknowledged as accepted by the Independent Tribunal Service until 8 January this year. Does my right hon. Friend agree that, in those cases, justice delayed is justice denied? As well as considering reform for the future, will he urge the ITS to do something to clear that backlog of cases, which is imposing a terrible burden on some of the poorest people?

Mr. Field: The answer to the first question is yes, as is the answer to the second question. Our proposals in the Social Security Bill are aimed at drastically speeding up the length of time that people have to wait between lodging an appeal and its being heard.

Mr. Dafydd Wigley: Does the Minister recall a case which I discussed with him and about which I wrote to the Secretary of State—that of a constituent who, sadly, died earlier this month having been waiting

18 months for an appeal to be heard about a disability benefit for a disability from which he died? Is it not an absolute disgrace that the resources that should have been available to that person while he was alive were denied? What will the right hon. Gentleman do urgently to get that sorted out?

Mr. Field: The right hon. Gentleman makes the case for reform more effectively than I could.

Mr. Simon Burns: Has the right hon. Gentleman had an opportunity in the past few months to read the Hansard Standing Committee reports on the Social Security Bill from last autumn? What change between then and now has led his Department in another place to accept amendments tabled by the Conservative Opposition in Committee, which the Government refused to accept then, concerning having someone with legal representation as a member of a tribunal? In the spirit of constructive opposition and government, are the Government now also prepared to accept the important principle which we put forward in amendments—that we should not have one-member tribunals, in the interests of natural justice?

Mr. Field: I am grateful to the hon. Gentleman for illustrating to the House what a listening Government we have. I should have thought that he would congratulate the Government, rather than trying to carp.

Mr. Burns: What has changed?

Mr. Field: I will give the answer for a second time: this is a listening Government.

Landlord Fraud

Dr. Brian Iddon: What action she has taken to tackle organised landlord fraud since 1 May 1997. [38487]

The Minister for Welfare Reform (Mr. Frank Field): We made it clear in our election manifesto that rooting out fraud is an essential part of our reform of welfare. We have already introduced regulations that give local authorities tough new powers to tackle fraudulent landlords and tightened the rules on paying benefit direct to landlords. That is another election pledge being fulfilled.

Dr. Iddon: I thank my right hon. Friend for that reply. In Bolton, up to 80 per cent. of rents paid to private landlords are paid directly by cheque, and I suspect that the figures are similar in other towns and cities. That creates the problem that tenants often leave premises without informing the local authority and the landlord does not inform the authority, for convenience or for other reasons. Does my right hon. Friend agree that we need tighter inspections of such premises to ensure compliance?

Mr. Field: I do. My hon. Friend's local authority concentrated its £20,000 challenge money on landlord fraud and has doubled its weekly benefits savings. I congratulate it on that.

Pensions

Mrs. Virginia Bottomley: When she last met representatives of the National Association of Pension Funds to discuss the Government's proposals for pensions. [38488]

The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham): My right hon. Friend the Minister of State and I have met representatives of the National Association of Pension Funds on a number of occasions since the pensions review was launched last July, most recently at the annual council dinner on 11 February.

Mrs. Bottomley: Did the Under-Secretary hear the chairman of the Association of Consulting Actuaries warn recently of the damage inflicted by the Government on industry's willingness to support pension schemes? A year ago, the Government promised to support occupational pension schemes, but the result was a £5 billion raid without consultation. Was that another election pledge being delivered?

Mr. Denham: I should have found it difficult not to hear the comments of the chairman of the Association of Consulting Actuaries, as I sat next to him when he spoke. In my own remarks to that organisation, I made it clear that this country's future ability to pay pensions—in whatever form—depends critically on our developing sound economic policies, avoiding boom and bust and achieving the long-term investment needed to create wealth.
The measures taken in last July's Budget, including the cut in corporation tax, and our commitment to sound fiscal policies will produce the economic circumstances in which pensioners can be paid in future.

Mr. Edward Leigh: The Minister for Welfare Reform told me in the Select Committee last week that the state retirement pension would remain universal for the lifetime of this Parliament. I am sure that the Under-Secretary will want to avoid any doubt on that point, which can perhaps be cleared up once and for all: will he confirm that the Government will not, in any circumstances, means-test the basic state retirement pension?

Mr. Denham: I do not think that the hon. Gentleman has been listening to earlier exchanges. Let me make it clear that we will honour the manifesto on which we were elected, as we have done on uprating and maintenance of the basic state pension as the foundation for retirement and on the many other measures that we have taken to help pensioners.

Mr. Paul Flynn: Did the National Association of Pension Funds agree that the best-value pensions in this country are paid by the state earnings-related pension scheme? Did it agree that the previous Government got away with damaging the value of SERPS because that was not appreciated by the general population and that our best way forward is to ensure that SERPS is well understood—as is the pensions points scheme in France—to pay index-linked pensions of superb value? Would the association also agree that the

worst way to go forward with stakeholder pensions would be to entrust them to those who wickedly mis-sold personal pensions to millions of people?

Mr. Denham: In fairness, the National Association of Pension Funds would be more anxious to stress that the majority of those who enjoy security in retirement have a good second pension from an occupational scheme. However, I agree that one of the critical challenges for the pensions review is to ensure that each individual has the fullest possible understanding of his or her pension provision and of the available alternatives. The pensions education working group established by my right hon. Friend the Secretary of State in September is considering that and we hope to receive its conclusions shortly.

Winter Fuel Payments

Mr. Desmond Swayne: How many people have not received their winter fuel payments. [38490]

Mr. Ben Bradshaw: What steps her Department has taken to help pensioners with their fuel bills since 1 May 1997. [38499]

The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham): All payments should now have been sent to eligible pensioners' homes or bank accounts, or issued to post offices for collection. An estimated 100,000 girocheques have not been collected from post offices. That may be for a variety of reasons, including death, hospitalisation and holidays, but the Benefits Agency will follow up each case to make every effort to ensure that the proper entitlement is received. We have committed a total of £400 million for last winter and the next to make winter fuel payments to help eligible pensioners with their fuel bills. This is the first time that any Government have provided automatic help to more than 7 million pensioner households with fuel bills to pay.

Mr. Swayne: The £850,000 television advertisement gave pensioners the impression that the cheques would drop through their letter-boxes. When they discovered that that was not the case and that they had to collect them, many people discovered that they could not cash them because they were already out of date. Why were the cheques issued with a four-week time limit on them?

Mr. Denham: For obvious security reasons, girocheques for Benefits Agency payments are normally time-limited. The advertising scheme was necessary to ensure that pensioners had the confidence to keep their heating on, and not be cold in the winter, because help was going to arrive.

Mr. Bradshaw: Will my hon. Friend confirm that the amount spent by the Government on winter fuel payments is larger than we would have spent had we restored the link with wages so scandalously abandoned by the Conservative party, with the added effect that the help has gone to those who need it most? Given that, will my hon. Friend consider extending the scheme beyond next year?

Mr. Denham: My hon. Friend is right to draw attention to the scale of the support that the Government have given


to pensioners. In doing that, we have given priority to the poorest pensioners, as we promised in our manifesto. We made a commitment to the operation of winter fuel payments last winter and next winter. A variety of initiatives is under way across government, examining, for example, utility regulation and energy conservation. We will take stock as the reviews come to conclusions on the best way to ensure that pensioners can heat their homes in winter.

Mr. Tim Collins: Given that the Under-Secretary mentioned the advertising campaign, will he say why the contract for it was awarded, without going out to competitive tender, to an agency that just happened to have a close link to the Labour party?

Mr. Denham: The reason is that that agency was extensively used by the Conservative party in government. Since 1989, the agency has had a standing contract—I forget the technical term—with the Department, properly agreed under EC procurement regulations. We merely continued to use the same agency that the Conservative party used when it was in government.

Welfare Reform

Mr. Tim Boswell: What representations she has received on the Green Paper on welfare reform since 26 March. [38491]

Mr. Andrew Mackinlay: What representations she has received from the Churches about the results of the Government's review of the social security benefits system. [38494]

The Minister for Welfare Reform (Mr. Frank Field): More than 100.

Mr. Boswell: I thank the Minister for Welfare Reform for that reply. As the Government's mood music accompanying their papers has suggested that those currently in receipt of benefits will not lose out, does it not follow that any process of welfare reform risks increasing the costs of an already expensive system? Has the Minister told the Chancellor or is the mood music unsustainable?

Mr. Field: At the end of last week, I wrote to all hon. Members to ask them to take the ideas of the Green Paper to their constituencies to consult party activists and other stakeholders in their areas. I look forward to receiving the hon. Gentleman's replies.

Mr. Mackinlay: Does the Minister recall in the correspondence that all candidates got in the general election the report of the Churches' inquiry into unemployment and the future of work? Will he take on board in the welfare review the strong message contained in that document that, although the right to work is inalienable—a right neglected by the previous Government—implicit in that is quality of work? People should have a right to work appropriate to their aspirations, skills and needs. That must be the objective of the Government. Will the Minister be mindful that people

should have the right to safeguard and look after their families? There should not be a presumption that people must work while neglecting their other obligations.

Mr. Field: The Government believe that those who can work should work. We also believe that we have a duty to help people to achieve that objective. The Chancellor made it plain in his Budget that those who work would be better off in work. Although it is desirable that people find work that fulfils their talents to the full, their primary duty is to earn a wage to look after themselves and their families.

Ms Dari Taylor: I ask my right hon. Friend to consider the response from some of my constituents in respect of reform of the welfare state. First, it is coming through loud and clear that both providers and users believe that reform is well and truly overdue; but, secondly, they are explicitly asking for an assurance that benefits staff will not only effectively administer reforms when those are in place, but do so with compassion.

Mr. Field: I was in my hon. Friend's constituency on Saturday. I was able to give her that assurance then and I give it to the House now.

Miss Julie Kirkbride: Does the Minister agree that one of the main objectives of the Government's welfare reforms ought to be to encourage more people to save more money for their old age? He has asked what our constituents think about his proposals and I can tell him that in Bromsgrove one of the major concerns among hard-working decent people who have saved hard for their old age is that they see others who are similarly elderly, but who spent their money during their working lives and now receive considerable benefits from the state to which those who did save are not entitled. They are angry about that and they would like to know what the Government's proposals are for reform in that respect.

Mr. Field: People saving adequately is one of our objectives in welfare reform. I very much agree with the second part of the hon. Lady's question.

Child Maintenance

Mr. Bill O'Brien: What proposals she has to include capital from the sale of the matrimonial home in the assessment of child maintenance; and if she will make a statement. [38493]

The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley): Money from the sale of the matrimonial home that has been earmarked for a new home or to acquire furnishings is ignored for a year. Any interest and dividends received from other capital are taken into account in the calculation of assessable income. We are looking at all aspects of the child support scheme to see where improvements can be made, in line with our manifesto commitments. We intend to consult widely on the issues raised by our reform of child support.

Mr. O'Brien: I thank my colleague for that reply. I appreciate what he and the Secretary of State are doing to try to erase the bristling anomalies arising from the Child Support Agency which we inherited.
On the issue of capital derived from the sale of the home, the parent with care has to use that capital to provide a new home for the children, whereas, in many cases, the absent parent is allowed to retain their part of the capital without any expenditure or commitment. That anomaly, which acts against the care of the children, should be addressed and erased. I appreciate the Under-Secretary's saying that he will address that issue in the review, which I hope will be completed quickly.

Mr. Bradley: May I take this opportunity to thank my hon. Friend and many other hon. Members for their significant contribution to our review of the child support system? Their knowledge and experience from individual case work in their constituencies are extremely important in guiding us as we try to unravel the problems of the Child Support Agency. I assure my hon. Friend that his point is extremely important and it will be considered as part of the general review.

Mr. Nicholas Winterton: The Under-Secretary referred to the CSA, but does he accept that it was set up with support on both sides of the House—not only the previous Conservative Government, but the Labour party, the Liberal Democrats and every other party in the House? Will he ensure that, in dealing with the matter, the House has more time and can consider what is to be done in a more measured way, so that we do not make the same prize error as we did when the House—not just the Government of the day—established the Child Support Agency?

Mr. Bradley: It is clear that the House agreed universally with the principle behind the Child Support Agency, but not with the way in which it has been set up and administered. I assure the hon. Gentleman that we shall take views from all sections of the House on the reform of the CSA. We shall take particular account of the views of the Select Committee on Social Security, which will have a valuable role in examining the proposals which we bring forward. We want to ensure that there is full consultation on the proposals so that we can try to unravel the mess that we inherited.

Fuel (VAT)

Mr. David Heath: If she will calculate the impact of the measures contained in the Budget relating to VAT on fuel, and the consequent adjustments in benefits including the state pension, on the weekly income of a typical old-age pensioner not in receipt of income support. [38495]

The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham): One of the first actions of the Government was to implement our manifesto promise to cut the rate of VAT on fuel, an issue which has been of particular concern to pensioners. As a result, on average, a typical single pensioner receiving the basic state pension will be 20p a week and a couple 25p a week better off.

Mr. Heath: Is not the import of what the Under-Secretary has just told us that the actual benefit for the average old-age pensioner of this much-fanfared

measure is paltry? Is it any wonder that many people are saying that, whatever other merits this year's Budget may have had, it was not a Budget for the old-age pensioner?

Mr. Denham: I do not agree with the hon. Gentleman. The Conservatives in government attempted to establish VAT on fuel at 17.5 per cent. We carried out that manifesto commitment, but, in addition to carrying it out, we introduced winter fuel payments, at a cost of about £200 million this winter, and the same again next winter. Those were significant commitments to today's pensioners.
We have a wide-ranging pensions review, looking ahead at ways in which problems facing today's pensioners can be tackled in future, but I do not believe that anyone can fairly say that, in the months in which we have been in power, the Government have not done significantly more for pensioners than the previous Administration did.

Mr. John Bercow: What estimate has the hon. Gentleman made of the effect on the lives of old-age pensioners who do not receive income support, and who live in rural areas, of the Chancellor's decision to increase excise duty on petrol in the Budget?

Mr. Denham: The issues of transport will be addressed in the forthcoming transport White Paper. As I have said, we have taken action—[Interruption.]

Madam Speaker: Order. The hon. Member for West Chelmsford (Mr. Burns) has already asked a question. He should let the Minister answer.

Mr. Denham: The Conservative party has already forgotten its determination to make pensioners pay VAT on domestic fuel at 17.5 per cent., and no amount of trying to side with those in rural areas will divert pensioners' attention from that fact. The issue of rural transport will be addressed in the forthcoming transport White Paper.

Housing Benefit

Mr. Crispin Blunt: What are the terms of reference of her Department's review of housing benefit. [38496]

The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley): Housing benefit is under consideration in the housing comprehensive spending review. The full terms of reference for the housing review were included in the press release issued by my right hon. Friend the Deputy Prime Minister on 24 July, which covered all the reviews being undertaken by the Department of the Environment, Transport and the Regions. Copies of the press release have been placed in the Libraries of both Houses.

Mr. Blunt: Earlier this afternoon, in reply to a supplementary question on Question 3 by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), the Under-Secretary gave the illuminating reply that the housing benefit review would be published as soon as it was completed. I wonder whether, without being intrusive, I may press the Under-Secretary a little more.


Will the review be completed by July this year, or some time next year? Will Under-Secretary be a little more specific than "as soon as it is completed"?

Mr. Bradley: It would be extremely difficult to publish it before it was completed, but we shall complete it later this year.

Child Support Agency

Mr. David Hanson: When she expects to publish the review of the Child Support Agency. [38497]

Mrs. Anne Campbell: What representations she has received about the reform of the Child Support Agency. [38498]

The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley): We believe that all children have the right to support from both their parents, wherever they live. That is why we are looking in detail at all aspects of the child support scheme to ensure that it provides an efficient and effective service to all our clients, as we promised in our manifesto.
In our consideration of child support, we have received representations from hon. Members, members of the public and a number of stakeholder groups. We aim to publish a consultation document setting out our proposals later this year.

Mr. Hanson: I thank my hon. Friend for that reply. Does he accept that the current child support system is

failing children, parents and the staff who must administer it? Will he ensure that, whatever else comes out of the review, the system is simplified and made efficient, and that promptness in delivery of service to consumers is paramount?

Mr. Bradley: I should like to answer five loud yeses to those questions. I can assure my hon. Friend that, as I have said previously, all aspects of the Child Support Agency are under consideration, and we value the contributions made by hon. Members from both sides of the House.

Mrs. Campbell: Will my hon. Friend join me in deploring the appalling mess left behind by the previous Government which has caused untold damage to many of the most vulnerable people in society? When an absent parent abandons more than one family, the CSA as it is currently set up is unable to cope with the children of the second or the third abandoned family. Does my hon. Friend agree that that matter must be addressed urgently?

Mr. Bradley: My hon. Friend rightly highlights yet again the detailed complexity in the system. It needs simplifying and presenting in such a way that both partners understand not only the CSA formula, but its administration. We shall consider those matters carefully as the review continues.

UK Atomic Energy Authority

Mr. Matthew Taylor: (by private notice): To ask the President of the Board of Trade whether she will make a statement regarding the resignation of Anthony Pointer as chief constable of the United Kingdom Atomic Energy Authority, and the reported threat to security at United Kingdom atomic energy installations due to staff shortages.

The Minister for Science, Energy and Industry (Mr. John Battle): I should inform the House that the chief constable of the United Kingdom Atomic Energy Authority constabulary, Mr. Anthony Pointer, resigned in late January, though the resignation takes effect from the end of this week. It occurred while discussion was under way in the UKAEA on the need for six extra police to be added to existing UKAEA numbers at Dounreay to increase the effectiveness of armed response capabilities at the site. At no stage has the chief constable expressed concern about the effectiveness of security at any other nuclear site.
Mr. Pointer tendered his resignation some months ago. The UKAEA and the adviser to the police authority, Sir John Woodcock, a former chief inspector of constabulary, attempted to dissuade him from resigning; but he resigned while the question of the constabulary complement was still under discussion in the UKAEA. Agreement to the six extra police that he had requested was concluded shortly thereafter. The agreement was reported to the police authority meeting in early February, where the chief constable, Mr. Pointer, declared himself satisfied with the extra staff numbers. The additional six police agreed are already in place at Dounreay and have been since March.

Mr. Taylor: Does the Minister agree that the information should have been brought to the attention of the House at an earlier stage—especially about the security concerns that the chief constable had about British nuclear installations? Can he confirm that that comes on the back of previous expressions of concern, not least in the previous year's annual report of the chief constable, about a one-third decline in numbers in the constabulary? Can he say whether the chief constable's concerns on staffing, which were expressed not only in January but on previous occasions, have been met?
Given the expression of concern by the British intelligence and police services and by the American Government about security at British nuclear installations, not least Dounreay, was it not incumbent on Ministers to give such information to hon. Members when a statement was made last week on the import of weapons-grade material to Dounreay?
Is not it time for a full inquiry—perhaps through a Select Committee or through Privy Council members, because of the sensitive nature of the issue—which should report to the House so that we can be satisfied that British nuclear installations are safe and secure as one of the world's largest depositories of plutonium?

Mr. Battle: We cannot call for a full inquiry when there is no problem. The chief constable agrees with that.

These are operational matters for the UKAEA, but it was in the public domain some time ago that the chief constable had tendered his resignation.
Of course UKAEA constabulary numbers are lower than they were some years ago. The constabulary is at its full complement—the agreed strength of 470. That is the figure required for security to be in full command of the situation. The numbers are lower because there are now fewer nuclear establishment sites, so they do not need the numbers that there were in 1987.
Security is maintained in full conformity with international recommendations and requirements and with national standards. Those standards are kept under constant review by the Directorate of Civil Nuclear Security. The Director of Civil Nuclear Security who is responsible for the setting of standards of physical security on all sites and for auditing security overall has confirmed that he is content with the standard of security now in place at Dounreay and at all the other nuclear sites. I am sorry to disappoint the hon. Gentleman, but there is no problem.

Mr. Tim Boswell: The House will accept that the detailed consideration of security matters is not best rehearsed in this place. However, does the Minister accept that we have a duty to ask, and he to give assurances in general terms, about the security of nuclear installations, the more so as the Government have this week taken on themselves the rescue of the material from Georgia and its transfer to Scotland on a non-returnable basis, in the interests of the security of that material and of the global community?
Can the Minister give the House these explicit assurances? First, is he satisfied that nuclear security at Dounreay and other establishments is and will remain adequate for any anticipated threat? Secondly, is the staffing of the Atomic Energy Authority police at the various establishments at all times maintained at an adequate level to deal with any perceived threat?
Thirdly, what considerations—again, in general terms—led to a recent increase in staffing levels, including the appointment of six extra officers at Dounreay? Did that proposal have the support of the UKAEA board, and will the board or the Department carry the cost of the extra staff? Did the proposal have anything to do with any paper or real exercises conducted on the security at Dounreay or other establishments?
Fourthly, did Mr. Pointer resign because of the staffing sproblems? If he thinks that they were being rectified, why did he not stay? It seems strange that a chief constable is being lost after only 18 months in the post.
Fifthly, is there not a case, which I hope the Minister will consider, for some further measure of independence and a higher profile than hitherto for the independent Directorate of Civil Nuclear Security? The director could then, in principle, draw attention to any failures whose disclosure he considered to be in the public interest, at least on the restricted basis with which we are becoming familiar in the case of security matters—for example, on a Privy Councillor level.
Finally, as the Government are fond of simplifying issues, will the Minister tell us explicitly which he is prepared to put first—nuclear security or the cost of securing that installation?

Mr. Battle: Security and safety at those establishments are paramount, as I made plain. The hon. Gentleman asked whether we are satisfied with security arrangements. The answer to his three questions is yes, yes and yes. We attach the utmost importance to security at Dounreay and all other sites.
The Directorate of Civil Nuclear Security is the standard setter and auditor of security in the civil nuclear industry. It works closely with the Department of Trade and Industry on a regular, almost day-to-day if not hourly basis from time to time, as the ultimate regulator of security in the industry. That is why I believe that matters are well under control.
I referred earlier to the full complement of 470 constables. That is regarded as satisfactory by the Directorate of Civil Nuclear Security. Of course, standards are kept under constant review.
As to the hon. Gentleman's question about the resignation of the chief constable, he was pressed to withdraw his resignation. Why he did not do so is obviously a matter for him. His request for extra police officers at Dounreay—which was under review by the UKAEA at the time—was agreed by the UKAEA management within days of the chief constable's resignation. At a police authority meeting this February the chief constable, Mr. Pointer, said that he was satisfied with the outcome of that review. Therefore, his failure to withdraw his resignation is obviously a matter for him.

Mr. Tam Dalyell: Does my hon. Friend know whether the hon. Member for Truro and St. Austell (Mr. Taylor) who asked this mischievous question—and whose constituency is located some 700 miles from Dounreay—has taken the trouble to visit that facility and talk to Roy Nelson or the trade unions involved? Does he understand that trade unionists and others who work in those plants are extremely proud—and rightly so—of what they have achieved for Britain and what they can achieve for all people on the face of the planet? Is it not right that their case should be put properly and their pride in their industry registered by the House?

Mr. Battle: I am extremely grateful to my hon. Friend for that contribution—not least because he used the word "mischievous". I believe that it is irresponsible to be mischievous in this area. I have visited the site at Dounreay—I do not know whether Opposition Members have—and, on my recent visit, I saw the new inner security fence that has cost more than £1 million and the new state-of-the-art alarm systems that were installed last year. Judging from some comments in recent days and hours, one would think that there is no security. However, I am confident that the security systems are in place.

Mr. Douglas Hogg: Will the Minister tell the House why we were not told in last Wednesday's statement about the chief constable's anxieties? Will the Minister tell the House whether the Prime Minister was aware of those anxieties when he entered into the secret agreement with President Clinton? Does the Minister understand that many of us find it difficult to reconcile his statement that all is well at Dounreay with the chief constable's determination to resign?

Mr. Battle: During negotiations about the number of constables at Dounreay, the chief constable proposed an extra six officers. It was agreed that those six officers would be put in place, and in February the chief constable declared that he was happy with that arrangement. Therefore, I cannot for the life of me understand why he persisted in resigning. That is why it is a matter for him and not for me.
It was well known at the time—it was in the public domain—that the chief constable had tendered his resignation. That was seen as an operational matter within the UKAEA as to how it organised its staffing complement in consultation with the Directorate of Civil Nuclear Security. The directorate has underpinned the decisions that were taken before this information came to light and before we accepted the Georgian high-enriched uranium. That uranium is being guarded properly at Dounreay—there should be no doubt about that—because the arrangements were put in place before it arrived.

Mr. Dale Campbell-Savours: For the second time in two weeks, there has been a reassuring statement to Parliament about these matters. The tabloid press reported at the weekend that an assault was carried out against a nuclear installation somewhere. Can the Minister confirm whether that report is true? If it is not, the record should clearly be put right.

Mr. Battle: There were many bits of information in the press and commentaries in the media during the weekend that were not true. Of course, security is tested and reviewed regularly. Fiction is occasionally reported—for example, that the Special Boat Services' report was ignored. That was absolutely fallacious. The service never participated in any security scenarios.

Mr. John Swinney: Does the Minister understand the public concern that will exist when, at a time when Ministers were conducting negotiations with the American Government about the transfer of enriched uranium to this country for storage and reprocessing at Dounreay, there was concern within the UKAEA at the level of security at Dounreay? Does the Minister not understand the public's difficulty in reconciling these two factors? Does he not believe that having made this statement, there should be some further independent scrutiny of the evidence that he has brought to the House, to guarantee that public concern can be fully allayed by an independent inquiry?

Mr. Battle: What was received from Georgia was a fragment of what was already stored, as I think was spelt out in previous answers. I would not be standing here if I felt that what was already stored was not securely and safely guarded. It is so guarded. There have been no security questions about Dounreay in recent months and weeks. The only issue was the complement of the constabulary, which was raised by the chief constable. The chief constable's advice to increase that complement by six was taken into account and implemented. I therefore do not believe that there is a need for a public inquiry into this matter.
To be as fair as I can to the hon. Gentleman, of course we must do our best to allay public fears and to ensure that nuclear establishments are properly secure. That is why security is regularly reviewed and tested in consultation with the civil nuclear security people.

Mr. Andrew Mackinlay: Is my hon. Friend aware that both in the previous Parliament and this one I raised the question of non-Home Office police forces and the fact that there is concern that, albeit perhaps unconsciously, commercial or quasi-commercial considerations can come into operational decisions relating to these forces? Is there not a case for a review of them and their stewardship?
Secondly, if, as my hon. Friend protests from the Government Dispatch Box, the chief constable resigned voluntarily after being persuaded to stay, can we be assured that no public money will be put up front in so-called compensation? If I take the Chiltern Hundreds or if someone resigns from the Daily Mirror or The Daily Telegraph, we go without compensation. If the chief constable has gone, presumably he is not going with a penny extra. He has resigned. He has quit his job, which he is entitled to do. There should be no additional emoluments. Can my hon. Friend confirm that that is so?

Mr. Battle: The chief constable's contract is with the UKAEA, not with the Department of Trade and Industry. It is a matter for the UKAEA contractually to sort out the arrangements when people resign. I simply leave it at that.
I share my hon. Friend's view in that I do not think—the point has been raised by Opposition Members, to be fair to them—that we should be engaged in a cost-cutting exercise. Rather, the opposite should apply. Security is paramount. I have checked the facts and figures and I am reliably informed that the overall funding for the constabulary has continued to rise year on year, even though numbers have fallen because there are fewer establishments.

Mr. Tim Collins: I welcome the reassurances that the Minister has been able to give the House. Will he confirm for the record that he is entirely satisfied with the level and adequacy of security at Sellafield, near my constituency in Cumbria?

Mr. Battle: The answer is yes. To the best of my knowledge, no one has even raised that question. I give the hon. Gentleman the assurance for which he asks.

Drugs

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): With permission, Madam Speaker, I should like to make a statement on the Government's new anti-drugs strategy.
I am pleased to lay before the House today the Government's White Paper, "Tackling Drugs to Build a Better Britain", which sets out our strategy for the next 10 years.
I hope that there is no need for me to have to persuade the House that more effective action against drugs must be a priority. Illegal drugs are now more widely available than ever before, and children of all ages are increasingly exposed to them. Drugs damage health as well as education and employment prospects. Drug problems wreck families and relationships. Drugs are a major contributing factor to the crime that undermines communities and gets in the way of progress and prosperity.
Much has been done in recent years. The previous Government's strategy for England, "Tackling Drugs Together", was an important step forward, particularly in the creation of drug action teams, which were set up to create partnerships across the country to tackle the problem. Important progress has also been made in Scotland, Wales and Northern Ireland, which have their own distinctive strategies.
We will build on that valuable work. There are some signals that levels of drugs misuse are relatively stable across England and Wales as a whole. That suggests that drug misuse is neither inevitably bound to increase nor irreversible, but the problems remain acute, and a fresh long-term approach is now needed to galvanise our efforts and bring new energy and action to these challenges.
Drug problems are complex. There are aspects that require responses at different levels. Responsibility for action lies with many different Government Departments, statutory services, voluntary agencies, businesses, community groups and individuals. A partnership approach is therefore essential, and we must be consistent in the messages that we send out.
Drugs are often only part of a range of problems facing individuals or communities which have to be addressed. Too often, however, action is patchy, unco-ordinated, too short term or based on inadequate knowledge of what works or of what others are doing.
That is why the Government appointed Keith Hellawell as the UK anti-drugs co-ordinator, to pull together a more strategic response. He was an experienced senior police officer with considerable anti-drugs expertise. He and his deputy, Mike Trace, are providing a fresh perspective and ensuring that action against drugs is effective and consistent. They have spent the first few months of this year in an intensive review of existing drugs activity, consulting more than 2,000 organisations and individuals. The new strategy is based on their rigorous assessment of the problem, of what works, and, of course, what needs to be done to have a real impact.
The new strategy has four main aims: first, to help young people resist drug misuse to achieve their full potential in society; secondly, to protect our communities from drug-related, anti-social and criminal behaviour;


thirdly, to enable people with drug problems to overcome them and live healthy and crime-free lives; and, fourthly, to stifle the availability of illegal drugs on our streets.
This year, we shall draw together clear, consistent and rigorous national targets against which to measure progress towards these aims. One of our early priorities will be to establish clear baselines for these targets.
Action will be comprehensive, combining firm enforcement with prevention. It will be linked to our wide-ranging programme to get people off benefit and into work, with reforms in the welfare state, education, health, criminal justice and the economy, and with work to tackle social exclusion. Enforcement against all illegal substances will continue, focusing, as necessary, on those who cause greatest damage.
The programme of action will include education for all young people, including primary-age children, to give them the knowledge and skills to resist drug misuse; information and support for parents; and programmes for young people who may be at high risk because of other social factors. It will include action to cut drug-related crime, including the piloting of drug treatment and testing orders; the disruption of local drugs markets; and crime reduction partnerships in local neighbourhoods. It will also include improvements to services for people with drug problems, especially young people, through health and community care; and it will include enhanced efforts to reduce the availability of drugs, with a focus on the activity that has most impact on our streets, using all our international and domestic resources.
The Government currently spend more than £1 billion on tackling drug misuse. Most of this is reactive—it tackles the consequences of drug misuse, not its causes. The White Paper proposes that, in the long term, the emphasis should shift towards prevention. We have to stop drugs problems before they start.
A detailed resource framework, building on this strategy, will be announced later in the year, but the Government have already shown their clear commitment to resources for fighting drugs. Last year, we extended the life of the drugs challenge fund. We reversed the proposed cut of 300 front-line Customs officers involved in anti-drug work, and, last month, we announced support from the single regeneration budget for 44 projects, which include prevention of drug misuse as one of their objectives. These range from a five-year drug prevention and regeneration scheme in the black country, to a seven-year partnership between the public and voluntary sectors in Kent, which aims to tackle the growing problems of drug and alcohol misuse.
In addition to this valuable activity, I can announce today that, for the first time, a proportion of assets seized from drug barons will be channelled back into the anti-drugs programmes. These assets have amounted to at least £5 million in each of the last five years. It is right that the profits from this evil trade should go back into tackling the problems that it generates.
The White Paper represents only a beginning. Continued development will be needed to translate its ideas into actions and achievements. Keith Hellawell and Mike Trace will oversee this programme, but their co-ordinating role does not take away from others the

responsibility for tackling different aspects of the problem. We must all work together to tackle the scourge of drugs.
This week, the co-ordinators will embark on a nationwide tour to explain the radical new measures to those in the field, and to ensure that everyone is working together. They will, of course, be involving drug action teams who will be responsible for implementing the strategy on the ground. The co-ordinators will continue to work with Government Departments and key figures from the private and voluntary sectors, and they will keep in touch with parents, teachers and young people themselves to listen to their views and to learn from their experiences. They will ensure that anti-drugs work is relevant and effective. From 1999 onwards, the UK anti-drugs co-ordinator will present to Ministers an annual report and plan of action, setting out the progress made and the work still to be done.
This strategy is ambitious but realistic. It sets out clear and challenging new objectives, but it builds on good practice and on what we know works in the fight against drugs. It has partnership and common purpose at its heart. It will require commitment, effort and energy from everyone involved in its implementation. It provides an opportunity to make real progress over time against a destructive social problem, and I commend the White Paper to the House.

Mrs. Ann Winterton: I begin by thanking the Leader of the House for her kind consideration in letting me have a copy of the new White Paper at lunchtime. It was very helpful indeed.
The Opposition welcome the publication of the White Paper "Tackling Drugs to Build a Better Britain", which outlines the Government's strategy on drugs for the next 10 years. We recognise that drug misuse is a huge, complex social problem. There are growing concerns about increases in drug trafficking. For example, recent figures revealed a 30 per cent. rise in drug-related offences in London, against an overall fall in crime. It is estimated that the increases in drug misuse and drug-related crime accounts for 50 per cent. of offences.
I believe that it would be helpful to establish common ground between both sides of the House and to reaffirm our support for a continuing commitment to legal deterrents and firm enforcement of the law by the police and Customs and Excise. There should be no soft message on drugs promoted from the House of Commons. We reaffirm our opposition to the legalisation of any currently controlled drug—such a move would send out the wrong signals and open the floodgates.
We welcome the fact that the Government are building on the undoubted success of the drugs strategy introduced in 1995 by the previous Leader of the House, who is now in another place, and supported by the right hon. Lady as shadow Leader of the House. "Tackling Drugs Together" provided a firm foundation on which to build, setting out, as it did, to take effective action by vigorous law enforcement, to provide accessible treatment, to place new emphasis on education and prevention, to increase the safety of communities from drug-related crimes and to reduce the acceptability and availability of drugs to young people and the health risks and other damage related to drug misuse.
When the appointment of the UK anti-drugs co-ordinator was announced last October, the point was clearly made that the same themes would be continued


and that the Government wished to build on the success of "Tackling Drugs Together" and not to demolish it. Against the background of the undoubted growth in drug misuse and the recent record seizures of heroin, there are high expectations of proposals in the new White Paper and a need not only for a clear long-term strategy, but for more immediate action.
As many hon. Members will wish to ask questions, I shall be as brief as I can. However, I have some questions for the right hon. Lady. The strategy that she has announced today involves many different professionals as well as those from the voluntary and charitable sector. What training will be made available, especially for those in education? How and on what time scale will it be delivered?
The programme of action includes young people at high risk. Who will be responsible for that action and by what means will it be achieved? What impact will the inclusion of drug education as part of the national curriculum have on other subjects? In other words, what will be lost as a result?
The right hon. Lady announced that national targets will be introduced in all priority areas and clear baselines will be established against which progress can be measured. How soon will that important information be available? Are there no comparable statistics available now that might prove useful?
How much money will be allocated to each target, and whence will this come? Will the Government provide any new money other than those extra funds from assets seized from drugs barons? Although I warmly congratulate the right hon. Lady on getting the Treasury to loosen its iron grip on such receipts, will she acknowledge that £5 million in each of the past five years is not a huge sum, bearing in mind the size of the task, and that a proportion of that sum is even less? What proportion will be made available and will she give an undertaking that if receipts rise, that proportion will not fall?
How will those resources be divided between education and enforcement? For example, will the enforcement agencies such as the police and Customs and Excise receive a share for their operational successes?
Will the right hon. Lady clarify the Government's policy on cautioning drug offenders, particularly for class A drugs?
Great store is placed on the drug treatment and testing orders, which are to be piloted before being introduced. Will the right hon. Lady confirm that they will not be available for at least two years? What action is being taken in the meantime, especially against drug pushers?
As drug abuse is a chronic, relapsing condition, will the right hon. Lady ensure that waiting lists for detoxification and rehabilitation programmes are reduced and that appropriate residential care, which has a measurable impact, is available, as well as care in the community from which the problem has often arisen?
What evidence can the Government produce to back up their claim that levels of drug abuse have stabilised?
The Government have asserted that they intend to be tough on crime and the causes of crime. If they are tough on drugs and those who push drugs, they will deserve and receive our full support for the measures that they introduce.

Mrs. Taylor: May I first welcome the hon. Lady to her Front-Bench responsibilities and thank her for her general

comments and her welcome for the White Paper? On what is clearly common ground, I pay tribute to my predecessor, Tony Newton, who introduced the previous Government's strategy, which set the framework for us to build on.
The hon. Lady said that this is a huge, complex social problem, and we can all agree on that. She also mentioned the difficulties in London and the vast mushrooming of drug-related crime in certain areas. It is true that, overall, there has been an increase in drug-related crime and, in recent years, there has been an increase in drug taking, but the problems are concentrated in certain areas. We must be realistic and recognise that there are very few parts of the country that we could claim were free from the problems of drugs and drug-related crime.
The hon. Lady asked about legal deterrents and said that there should be no soft messages from this House. I agree. I have said that we should send out clear and consistent messages. We must remember that drugs ruin the lives not only of many young people and families but of people who live in those communities and who are secondary victims because they are the victims of crime, to which many young people turn to fund their drug taking.
The hon. Lady asked me specific questions about how we will implement the White Paper. In certain respects, she asked me to prejudge the next stage in consultation and implementation. She can rest assured that the professionals have been widely consulted and are very much in line with our thinking and the way in which we wish to take things further.
The hon. Lady specifically mentioned education and the need to train teachers, which we, of course, recognise. People undergoing teacher training are being told about the problems and are being helped to explain the issue to young children. Teacher training is, of course, an on-going process. We know from different experiences in different parts of the country that some areas have already developed very effective education packs. I visited a school in London this morning, where Project CHARLIE—Chemical Abuse Resistance Lies in Education—was being used to good effect. We can use and promote best practice so that all schools are able to get the benefit of experiences thus far.
The hon. Lady asked about targets, when they may be set and why we could not start immediately. We looked at the possibility of establishing targets as part of the White Paper, but the baseline information was simply not available in a way that would have given us confidence that targets would be realistic. It is always possible to set targets that can be met, but whether that means anything at the end of the day is another matter. We thought that it was right to spend time ensuring that the targets were relevant and realistic before jumping in. As a result, it is impossible to answer her question about how much money will go into each specific type of work, just as it is to give details of how seized assets may be used. However, I accept her recognition that allowing seized assets to be used in such a way is a significant step forward.
The hon. Lady asked about resources generally. Of course, resources are important in dealing with these problems. We must be realistic and acknowledge that this is the first time that any Government have had such a clear investigation into what is being spent on tackling the


problem of drugs. We are trying to ensure that we have the full picture, because we want to know what works, what provides value for money and what kind of treatment is most effective. There is still some way to go in assessing all that, although, as I said in my statement, the Government have made their commitments on resources very clear by extending the drugs challenge fund, reversing cuts in front-line Customs officers, ensuring that drug projects are a priority in the single regeneration budget and, now, by the proposals on seized assets. Once the comprehensive spending review is complete, more can be said on the matter. We have laid out our principles, and they will guide us in future.
The hon. Lady asked about cautioning. Although we would not want to interfere with the way in which the police make decisions in any area or on any case, we would like more consistency—as, indeed, would many police officers. We recognise that cautioning has a part to play. We must ensure that we provide the most effective mechanisms for dealing with the problems. There must, therefore, be a degree of flexibility.
The hon. Lady asked me where the figures on possible stability in drugs problems had come from. They are from the previous British crime survey. Although there are signals that there may be some stabilisation in trends of drug taking, we must all be aware that the nature of drug taking may still be changing, which, in itself, may pose extra dangers for many young people.

Mr. Stephen Timms: I warmly welcome my right hon. Friend's statement and the response of the hon. Member for Congleton (Mrs. Winterton), whom I welcome to the Opposition Front Bench.
Does my right hon. Friend agree with the all-party group on drug misuse about the importance of starting drugs education at primary schools, building up young people's resistance to drug misuse at an early stage? She made explicit—and I welcome that fact—the link between tackling drugs misuse and the Government's wider assault on social exclusion. How does she expect the Government's urban regeneration policy to boost the fight against the most damaging drugs in inner-city areas, such as the one I represent in east London?

Mrs. Taylor: I am grateful for my hon. Friend's comments, and I know that the all-party parliamentary group has been looking at the issues. I am glad that he welcomes what we have said about education in primary schools, as it is important that we integrate an awareness of drugs into school curricula at an early stage. That will not have an adverse impact on other parts of the school curriculum, because youngsters of that age already receive education about medicines, their bodies and respect for themselves. Drug education can be integrated into that, although it must be appropriate for the age group that any teacher is dealing with. As I have said, there are examples of projects that seem to work.
My hon. Friend asked about urban regeneration. We have incorporated drugs projects into the criteria for single regeneration budget money. The announcements we have made on SRB money show that we are serious about encouraging drug work in that field because, on many occasions, the people who take drugs are the same

people who play truant, are excluded from school and do not get jobs. We need an integrated approach to the problem.

Mr. Simon Hughes: I join other colleagues in welcoming the White Paper and the Leader of House's statement. The White Paper is clear, comprehensive and does not sensationalise. Although my party continues to believe that a standing royal commission would have benefits in terms of giving non-political advice, this first report from the new drugs tsar is a good start and shows a promising way forward—particularly in pointing out the importance of moving the agenda from dealing with the causes of drugs misuse to the consequences.
Does the right hon. Lady envisage an increase in the amount of drugs treatment? Will she make sure that those who come to treatment through the health route do not find that their opportunities are blocked by those who are referred for treatment through the criminal route? Will drugs education be a matter of core curriculum teaching in primary and secondary schools? If so, how soon does she envisage that beginning? Can I push her on resources? If £5 million a year has been the amount collected—as it were—from drugs barons in past years, can she give any figure for the amount to be committed from that income to the anti-drugs battle? When will that begin? Will that amount be protected in the future? Is it new money?

Mrs. Taylor: I thank the hon. Gentleman for his welcome. He used the word "sensationalise", and it is important that we have sensible discussions about the problems without sensationalising them. I am glad that the House has reacted in that way today. He asked about treatment, and, clearly, there are pressures in terms of existing capacity. We want to ensure that those people who need treatment can get it at an appropriate stage. That is particularly important for younger people. If we can intervene earlier, it will be beneficial.
The hon. Gentleman mentioned the criminal route. My right hon. Friend the Home Secretary is piloting schemes to try to make sure that prisoners, or those who come into contact with the criminal justice system, can get the treatment they need. That will help individuals, but it will also help the communities that they may have been attacking to get money for their drugs habit.
Drug education should be incorporated into the existing national curriculum. The House should be aware that there is scope in the core curriculum—even at key stage 1—for young people to learn about medicines and about respect for themselves. Incorporating drugs education into that phase is important.
The money from seized assets will provide new resources. That will be not only useful—the money can be spent on extra treatments, for example—but important, as it will send out signals about how seriously we take the problem.

Mr. Paul Flynn: Does my right hon. Friend recall my writing to her a few months ago following a report in which doctors claimed that cannabis had unique medical benefits and that seriously ill people should be able to use it? Does she also recall the three people who came to the House some four years ago—a lady suffering from cerebral palsy who was taking


cannabis to alleviate her pains, the mother of a 20-year-old girl dying from cancer who had discovered that the available chemical drugs were turning her daughter into a zombie, but that she was lucid on cannabis, and a woman who was using cannabis to deal with the pain and indignities of multiple sclerosis?
My right hon. Friend said that the Government intend to continue to inflict the same punishments on cannabis users. Does not she agree that the message that the House is sending to those tens of thousands of seriously ill people who are using cannabis as a unique medicine is that they should either continue to suffer or go to a market that is controlled by irresponsible criminals, in which they have no control over the quality or the purity of what they take? Is not that message unfair and cruel?

Mrs. Taylor: We all sympathise with anyone who has a serious and debilitating illness, but the Government take the view that, at this stage, there is insufficient evidence to demonstrate the effectiveness of cannabis or cannabis derivatives as therapeutic agents—that view was also expressed by the British Medical Association in its recent report.
Research into both cannabis and cannabinoids can take place within existing Government policy and the legislative framework, in which procedures are laid down. Over the past year, the Home Office has received 27 applications for licences to carry out such trials—25 have already been approved. If people believe that some cannabis derivatives have therapeutic or medical benefits, they can follow procedures to take the situation further.

Mrs. Angela Browning: Will the Leader of the House put in the Library details of the primary school projects that she has identified as successful? Will she confirm that the Government are examining best practice and results from primary education abroad? I am sure that she would agree that deciding what is appropriate for children of different ages is a sensitive and difficult issue.

Mrs. Taylor: I am grateful to the hon. Lady, and I am happy to provide any extra information that is required. She gives me the opportunity to mention the fact that we are today publishing guidance notes on some of the best practice and information that has been drawn up by the UK anti-drugs co-ordinator and his deputy on what is thought to work in different circumstances. She rightly says that we must be sensitive in dealing with the problem, as children do not react in the same way. We do not want to make drugs seem attractive, because they are daring, but we shall do children a grave disservice if we leave them in ignorance—we must provide appropriate education for all children and, indeed, for their parents.

Mr. Lawrence Cunliffe: Has my right hon. Friend studied what some of us consider to be the resounding success of the American drug courts, which deal exclusively with drug addicts and users of all ages? There is a highly specialised network of professional advisers and therapists to make recommendations to the drugs judge, who, for many years, has investigated drug addiction. That seems to be the right way in which to proceed—there has been a 34 per cent. success rate in rehabilitation, partly through short, stiff sentences, which have proved to be a great deterrent to users. Will she, with

the Home Office, set up an experimental court to establish whether such a system would be practicable in this country?

Mrs. Taylor: My hon. Friend mentioned drug courts. It is always difficult to take a feature from another country and simply translate it here, without taking account of the different systems and cultures. The drug testing and treatment orders that my right hon. Friend the Home Secretary is piloting are a British version of part of what my hon. Friend is talking about. We are piloting those schemes because we think that they could be important, but the long-term outcome must be our priority.

Mr. Nicholas Winterton: I welcome the statement and the White Paper. I congratulate my hon. Friend the Member for Congleton (Mrs. Winterton) on her extremely robust performance at the Dispatch Box—I am sure that it will be the first of many—and the Leader of the House made an excellent statement.
Macclesfield is fortunate in having the Barnabas centre, which has had great experience as a drop-in centre and tries to wean young people, in particular, off drugs and to start the rehabilitation process. My local paper, the Macclesfield Express Advertiser, said that some young people in Macclesfield spend up to £1,000 a week to fund their drug addiction. Will additional resources be put into residential establishments, as I believe that they stand the best chance of explaining the evils of drugs and helping people to get rid of an addiction that costs this country so dear?

Mrs. Taylor: I thank the hon. Gentleman for his generous comments to both Front-Bench spokesmen. I am not surprised that we have heard about Macclesfield today. He referred to the important issue of some young people spending up to £1,000 a week to fund their drug habit. Of course, it is rarely their own money: the victims of crime fund the habit, and that is one of the reasons why we must give the problem a high priority.
The hon. Gentleman asked about residential establishments, which are, of course, an integral part of the treatment provision that must be available, but they are not the only answer and we must remember that those who are successfully treated in them must still be prepared to go out and live in the real world again. One problem is that people often go back into their old communities and some of the work is undone. Residential establishments have a role to play, but so do many other types of development, because the problem is extremely complex.

Mr. John McDonnell: This morning, I visited the Mount prison in Hemel Hempstead, which detains two of my constituents. Like every other prison in the country, it is bedevilled by a sizeable drug problem, but I was pleased to note the attempts that the governor and prison officers are making to introduce mandatory and voluntary drug testing, to have drug-free wings and to prepare prisoners for release in a drug-free state.
I was concerned to see that there were only two staff provided by Druglink in support of that initiative in the prison. There needs also to be greater support for the


probation service when prisoners come out of a prison drug free and return to the community, where they are again susceptible to drug dealers.

Mrs. Taylor: I do not know the prison to which my hon. Friend referred, but I am glad that he thinks that good work is being done there. Clearly, both mandatory and voluntary testing have a role to play. He mentioned Druglink staff and the probation service. A review is being conducted into how people can work together, and I assure him that when we were drafting the White Paper, the Prison Service staff, probation officers and link workers were all consulted, and they will be consulted on implementation in the future.

Mr. Julian Brazier: Will the right hon. Lady confirm that central to all that must be securing convictions against drug barons? I see the Home Secretary in his place. Will the right hon. Lady tell us whether the Government are studying the rules of evidence, in particular the use of intercept evidence in trials and the present abuse whereby defence lawyers can demand to know the names of informers, even when their clients have been caught in possession? Surely the civil liberties of the accused cannot be allowed to override the desperate need of the wider community to tackle this evil.

Mrs. Taylor: I think that we would all like to be more successful with the drugs barons, who are clearly the evil people driving the trade and encouraging and tempting young people into drug misuse. The hon. Gentleman mentioned the rules of evidence; some of his points about disclosure have been covered. Intercept evidence is a complicated area, although I know from my right hon. Friend the Home Secretary that it is being looked into, along with other matters.

Mrs. Anne Campbell: May I warmly welcome my right hon. Friend's statement, in particular the part that dealt with the introduction of drugs education into the primary curriculum? However, does she agree that by the time children reach secondary school age, they are often more knowledgeable about and familiar with drugs than their parents? Will she ensure that drugs education and awareness are made available not only to children and teachers, but to parents, grandparents and other people who come into contact with young children?

Mrs. Taylor: My hon. Friend is right to say that parents need extra information. Schools have a part to play in that, but so does everyone else. We propose to issue a new leaflet to parents, prepared by the Health Education Authority. That will go out later this year. Also, conferences are proposed in different parts of the country, aimed at involving parents. As parents, we all have significant responsibilities. It is important that we understand the situation and, perhaps, become aware of it as soon as our children enter school. Some parents may be learning with their children, but, far too often, children know more than their parents.
I welcome what my hon. Friend said about the primary curriculum and I hope that she will be pleased that the first port of call for the anti-drugs co-ordinator in the next phase of consultation about the White Paper will be Cambridge in the near future.

Mr. Douglas Hogg: The right hon. Lady has commended to the House the value of an integrated approach to the drug problem, and I agree. What will happen after devolution, particularly in the context of Scotland? As this is a multi-agency strategy, I assume that responsibility for health and the police and education authorities in Scotland will be the exclusive responsibility of the Secretary of State and then a Scottish Minister of a Scottish Parliament. How will the Government maintain an integrated approach to fighting drugs if responsibility in Scotland is a matter for the Scottish Parliament and Scottish Ministers, and the same applies in Wales and perhaps in Northern Ireland?

Mrs. Taylor: I do not see that there will be any difference after devolution. At the moment, there is a separate but related Scottish strategy. My right hon. Friend the Secretary of State for Scotland has been working with the United Kingdom anti-drugs co-ordinator, and that co-operation will continue.

Mr. Ronnie Campbell: I congratulate my right hon. Friend on the statement, which is a step in the right direction. It would be remiss of us if we did not congratulate United Kingdom Customs officers on the way in which they have done their jobs and on the number of seizures that they have been getting. I remind my right hon. Friend that the number of Customs officers was halved by the previous Tory Government during the past few years. I heard what she said—she is reversing that trend. I hope that it is reversed and that Customs officers get back to full strength. If they do, we will see the number of drugs seizures double.

Mrs. Taylor: I thank my hon. Friend. Customs officers have an important role to play. The Financial Secretary to the Treasury, into whose remit they fall, is on the Government Front Bench and will pass on the congratulations of the whole House.
My hon. Friend will be aware of initiatives for disaffected youth in Blyth Valley, mainly focusing on drug abuse, that have been included in a single regeneration budget grant. I hope that that will help him to fight the problem in his constituency.

Dr. Brian Iddon: I regret that there seems to be little evidence in Greater Manchester that the problem of misuse of drugs is stabilising. Indeed, there has been a frightening change of culture, as heroin prices have collapsed and young people have moved straight to heroin without experiencing soft drugs. That has happened in spite of many excellent projects and the work of the previous Government. I sincerely hope that the Government can get to grips with the problem. I know of their serious intent and welcome the statement. Misuse of drugs is the third largest industry in Britain. It makes £8 billion internationally, so spending £5 million is a drop in a large ocean.
Are the Government prepared to keep an open mind on misuse of drugs? The Police Foundation has held an excellent two-year inquiry and the House of Lords


Science and Technology Committee is taking evidence on cannabis. My right hon. Friend said that there would be an annual report on the subject, which I welcome, but the Government must listen to all opinions so that together we can overcome a major problem.

Mrs. Taylor: The Government are always willing to listen to all opinions. I hope that my hon. Friend will listen to the opinion of the World Health Organisation, as its most recent report stated that cannabis has an adverse effect on human cognitive, motor skill and reproductive functions, that smoke from cannabis contains up to 50 per cent. more carcinogens than tobacco smoke, that cannabis is a risk factor in schizophrenia, and that up to 50 per cent. of regular users develop dependence that they are unable to control. I hope that those who take a different line from that of the Government will bear all those factors in mind.

Several hon. Members: rose—

Madam Speaker: Order. To be helpful to the House, I should like to call all Members who are standing. Will they help me by making questions and answers very brisk?

Mr. Nigel Evans: When I was chairman of the all-party drugs misuse group, I welcomed the appointment of the drugs tsar, and I welcome the right hon. Lady's strong, clear announcement today, which is one in the eye for the Independent on Sunday and its irresponsible campaign on the decriminalisation of cannabis.
Will the right hon. Lady send a congratulatory message to Kennington Road primary school in my constituency which announced at the weekend that it would involve itself in getting the message across to primary school children on the dangers of drug and solvent abuse? There is an important job for the primary schools to do. Will she ensure that there is proper support for teachers, particularly in rural schools, which are not insulated from the drug problem? Will she ensure that all parents—not just targeted or high-risk parents—get information about what is being taught to their children, so that they, too, can get involved?
The right hon. Lady mentioned £5 million. Will she consider using all the assets of drug dealers for her campaign, as that would send a very clear message? Finally, may we debate in the House of Commons the drugs report that is to be issued every year, so that we can all have our say on how the problem is being tackled?

Mrs. Taylor: I thank the hon. Gentleman for his remarks and am happy to send my congratulations to Kennington Road primary school. It is important that we provide information to help schools to present these problems to children, but that they should have the independence to judge what is most appropriate in each case. He is right that other problems should be considered, such as solvent abuse, which is a real problem in many areas.
The hon. Gentleman asked for support for teachers. I said that it will be provided. He made the valid point that rural areas, like urban areas, need advice, information and support. He is also right that all parents need information. No parent can complacently ignore the problem.
The seized asset figure that I gave was the figure for seizures. What might be available will depend on what can be seized. We are serious about trying to ensure that as much money as possible is recycled into treatment provision. As I resist so many calls for debates from other hon. Members, I must be wary of his request for a debate each year, but I shall bear it mind from time to time.

Mr. Bob Blizzard: My right hon. Friend's statement will be welcome in my constituency, where the police and the community have to deal with more cases of heroin abuse than cannabis abuse. Does she accept the message given to me over many years by the pupils whom I taught in several high schools, that education about the dangers of drugs needs to start much earlier, before children come to high school? It must start in primary schools. Does she agree that all the education in the world will not be effective unless it is backed up by adequate enforcement, and that enforcement requires adequate resources, but that ultimately there will be a return on those resources through fewer burglaries and fewer neighbours from hell who terrorise neighbourhoods because of drugs?

Mrs. Taylor: My hon. Friend is right that all those aspects must go together. We need education, not only for secondary children but for primary school children. Of course, that must be done in the context of strict enforcement. He is also right that many people become victims when drugs take hold of an area. My right hon. Friend the Home Secretary has already made statements about anti-social behaviour, and we are very conscious that whole communities can suffer when young people in an area start taking drugs. That is why we have a responsibility not only to young people but to the community in which they live.

Mr. Donald Gorrie: Will the Government consider extending their drugs programme to include the misuse of alcohol? Under-age and excessive drinking causes as great—if not greater—social problems, as do drugs in terms of domestic violence, violence in the street, social breakdown and so on. The misuse of alcohol would fit well with the educational and social aspects of the Government's programme.

Mrs. Taylor: My hon. Friend the Parliamentary Under-Secretary of State for the Home Department chairs a ministerial group on alcohol misuse. We are very conscious that there are many problems. Many of the youngsters who abuse alcohol are the same ones who abuse drugs and who are truanting or excluded from school. That is why we cannot look at these problems in isolation and why we are trying to ensure better co-ordination to tackle the problems together.

Mr. Syd Rapson: Should not we all embrace this statement with great enthusiasm, as it will be embraced in my constituency, not least because my wife is chair of the crime prevention committee? I live on a council estate where the evidence of youth involvement in drug crimes becomes greater every day. We should welcome it unreservedly and not be churlish or seek to water it down.

Mrs. Taylor: I am grateful for my hon. Friend's support. From his personal experience, he understands the


extent of the problem in Portsmouth, which is to receive nearly £3 million over seven years from the single regeneration budget. Part of that project is aimed at diverting disaffected young people from crime to education and employment. That reinforces the need not only to tell young people that they should not take drugs but to be able to offer them a positive alternative. We need to be firm in our message that young people should not take drugs, and firm in respect of what we have to offer young people by way of better opportunities.

Mr. Edward Leigh: As a result of today's statement, what extra resources are being made available to the Prison Service to enable judges to impose more and longer deterrent sentences on drug pushers?

Mrs. Taylor: My right hon. Friend the Home Secretary has already increased resources for this year. The answer to drug problems does not only involve sending appropriate people to prison. Many other options are often more appropriate. We must ensure that we have sufficient flexibility. If we can divert people from prison and criminal behaviour by providing effective treatment, that is one of the options which should always be considered. There are no hard and fast rules about what works in any individual case. The hon. Gentleman is wrong if he thinks that there are simplistic answers to the problem.

Mr. David Hanson: May I broadly welcome my right hon. Friend's proposals? Will she confirm that they cover solvent abuse, which involves the widespread abuse of products that are legally available and results in the deaths of more than 100 young people, mostly under the age of 16, every year?

Mrs. Taylor: I know that my hon. Friend has a long-term interest in the problem and has raised the issue on other occasions. He is right that we should not simplistically separate the different strands of this problem. As I said earlier, the young people who take drugs are often those who have taken alcohol or been involved in solvent abuse. In some places, drug action teams take a more comprehensive approach, but we have left it to those teams to decide the most productive approach and the best way to co-ordinate locally.

Mr. Colin Breed: The right hon. Lady rightly emphasised the need for clear and consistent messages. Is she aware that governing bodies with a policy of excluding any pupil found with drugs on school premises find it difficult when local police then only give a caution? The penalty visited on the pupil by the governing body is often seen to be greater than that under the law of the land, and governors find it difficult when they confront the parents of the children involved. There a need for a clear and consistent approach both at governor and school level and at local police level.

Mrs. Taylor: I am sure that there is a need for clear and consistent approaches. The hon. Gentleman mentioned the responsibilities of governing bodies. At the end of the day, provision must be found for any child who is excluded temporarily or permanently. We must try to ensure that the various agencies work together so that

fewer children are excluded, not least because excluded children are more likely to get deeper into drug taking and criminal activity. That is one of the prime reasons why we must have as much co-operation as possible.

Mr. Ivan Henderson: Does my right hon. Friend agree that one of the most important strategies for stopping drug misuse is preventing people from bringing drugs into ports? Will she join me in congratulating the Customs at Harwich International port on its great results in detecting drugs and preventing them from entering the country? Will the strategy for education include the use of professionals such as Customs officers in schools close to ports to help educate young people, as happens in Harwich?

Mrs. Taylor: I am happy to join my hon. Friend in congratulating Customs officers in his area. They play a critical role in all this, and their work should be recognised, along with that of many other agencies, including the police, the Prison Service and probation offers. Many people are already involved in the fight against crime. Much co-operation is taking place, and we have to build on that.
My hon. Friend asked about education and whether it was possible for Customs officers to go into schools as part of the drugs education programme. In some areas, Customs officers do that; in others, police officers and others involved in the fight against drugs participate in that co-operative way. We should look at what works in any particular area and always be ready to build on that, learn from best practice and ensure that best practice is spread throughout the country.

Helen Jones: I also warmly welcome my right hon. Friend's statement, especially the proposals to tackle drugs-related crime, which makes life hell for many decent people in parts of my constituency. Does she agree that an important part of tackling the problem is what goes on in our prisons? Does she welcome what is being done by officers and nurses in HM prison Risley in my constituency, who have put forward proposals to set up a drugs detoxification unit? Will she aim to ensure that the Prison Service gives priority to similar proposals throughout the service, given that someone who goes into prison addicted to drugs and comes out addicted is highly likely to commit further crimes?

Mrs. Taylor: I agree with my hon. Friend. Someone who goes into prison addicted to drugs and comes out addicted to drugs will almost inevitably get caught up in crime. I have not visited the unit at Risley, but I have seen the unit in Strangeways and heard of various prisons' success in ensuring that prisoners who are willing to take the first step to kick a drugs habit are given the support and help they need. I am sure that the Prison Service will generally welcome my hon. Friend's comment and be happy to try to move in the direction she recommends.

Fiona Mactaggart: I apologise to other hon. Members, whose questions I did not hear; I did hear the statement. May take this opportunity to thank the Government for the £2 million in support for the anti-drugs work of the single regeneration budget partnership in Slough? May I urge that, in tackling this


problem, we work carefully with parents of different communities and cultures? The Sikh community in Slough are extremely anxious about young people's involvement in drugs, but they feel that, in the past, many of the programmes have not been sensitive to their concerns. They would be grateful for the assurance that their needs will be clearly at the centre of the strategy.

Mrs. Taylor: I am grateful for my hon. Friend's comments. She is right to say that all parts of the community need help in this respect. She mentioned the SRB projects in Slough, which are unusual in including peer-led drugs education as well as outreach workers. It is important that we use all possible means to get the message across. She also mentioned minority communities and the Sikh community in Slough: we have to face the fact that no community is immune from the problem of drugs and that if we are to get the message across to different communities, we may have to use different ways and be sensitive to the reaction of the communities. The problem is so serious that all parts of the country and all communities must get the necessary information so that, together, everybody is as well equipped as possible to face the challenge and to equip our young people for a better future.

Point of Order

Mr. Tam Dalyell: On a point of order, Madam Speaker. As some of us know only too well, you are, quite rightly, very stringent about your selection of subjects for private notice questions. My point of order, on one level, might seem a bit impertinent and cheeky in relation to the Chair, but it is not meant that way.
Before accepting a subject for a private notice question, should there not be some assurance by the hon. Member asking the question, if he is not the constituency Member, that, if he is going to criticise people and an institution, he has had the courtesy at least to attempt to contact them?
It was a bit odd that this afternoon's question should come from the hon. Member for Truro and St. Austell (Mr. Taylor). I wondered whether he had consulted his right hon. Friend the Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan), because it became quite clear that he had not bothered to contact Dounreay. Do you, Madam Speaker, think that it is any part of the Speaker's duty to contact the institution involved before criticism is made, to determine whether an hon. Member has had the courtesy to hear the other side of the story before taking up the time of the House of Commons and causing great damage?

Madam Speaker: It is no duty of the Speaker to question the fact that an hon. Member, wherever he represents, has put a private notice question to me. My only concern is to ensure that it meets the criteria of urgency or emergency or, as in this case, whether I am able, by bringing a Minister to the Dispatch Box, to give what I thought the public needed in terms of reassurance. It was on that point that I determined to bring the Minister to the Dispatch Box. I have nothing further to say on that matter.

Mr. Simon Hughes: Further to that point of order, Madam Speaker.

Madam Speaker: There can be no further point of order. I have made it quite clear what the position of the Speaker is, and I have given a reason, which is unprecedented, but I thought that it was important that the people should be reassured about the situation. I believe that they have been reassured today, and that was my reason for bringing the Minister here.

Orders of the Day — Finance (No. 2) Bill

(Clauses 1, 7, 10, 11, 25, 27, 30, 75, 119 and 147)

Considered in Committee.

[MR. MICHAEL J. MARTIN in the Chair]

Ordered,

That the order in which proceedings in Committee of the whole House on the Finance (No. 2) Bill are to be taken shall be: Clause 30, Clause 75, Clause 147, Clause 1, Clause 7, Clause 10, Clause 11, Clause 119, Clause 25, Clause 27.—[Mr. Geoffrey Robinson.]

Clause 30

CORPORATION TAX: DUE AND PAYABLE DATE

Mr. Peter Lilley: I beg to move amendment No. 2, in page 15, line 25, at end insert—
'Provided that a draft of the first set of regulations made under this section shall be laid before Parliament and the regulations shall not be made until the draft has been approved by resolution of the House of Commons.'.
This is a tax-raising Bill: it adds to the taxes raised by the previous Finance Bill introduced last July, and the bulk of those taxes fall on business and on the savings available to businesses to finance their investment. Before the election, the Chancellor repeatedly promised that, apart from the windfall tax, the Labour party's programme would not require any extra taxation at all. The Labour party went out of its way to claim that it would be friendly to business in particular, to try to allay the fear business rightly had of a Labour Government.
Labour gave us a test to judge its tax policies. Labour's manifesto stated:
How and what governments tax sends clear signals about the economic activities they believe should be encouraged or discouraged, and the values they wish to entrench in society.
That is the test that we can use to establish, on the basis of their tax record so far, what activities the Labour Government wish to discourage and what values they wish to oppose in society. What is clear is that business has been singled out for extra taxation; almost all the extra taxation introduced so far falls either directly on companies or on savings that will finance business and investment. We want confirmation from the Government today that it is their intention deliberately to send clear signals that the economic activities they believe should be discouraged are the activities of business and of saving for the purpose of financing investment, because it is on those activities that they have loaded all their taxes.

Mr. Barry Gardiner: If the Government are seeking to punish businesses, why do we now have the lowest ever rate of corporation tax for small businesses?

Mr. Lilley: Because the Government have raised taxes massively with their right hand and given back a small amount with their left hand. Perhaps I should say it the other way round; it is, of course, the left hand that raises taxes, and a very small amount is being given back in the form of a lower corporation tax rate.
In total, nearly £20 billion is being raised from the business sector as a result of the extra taxes introduced in the Government's two Budgets—and that is after allowing for the reduction in corporation tax rates announced in both Budgets. That is why we say that there is an extra load on business. We should like the governing party to be more frank and honest about what it is doing. That £20 billion burden on business means that business has £20 billion less to invest, £20 billion less with which to generate jobs and £20 billion less with which to enhance the growth potential of the British economy.
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Clause 30 introduces a quarterly payment system for corporation tax. It is an unplanned baby, conceived by accident in July 1997. Its progenitors were thinking of other things when they brought it about. They had not thought what, nine months later, would flow from their actions. They thought that they were simply abolishing tax credits—an enjoyable activity for socialists, because it was a stealthy way in which to raise a huge amount of tax from savers and companies—but one thing leads to another.
Abolishing credits in July 1997 meant that foreign income dividends had to go in the Finance Act 1997. That meant that advance corporation tax ceased to be tenable, and, during the summer, the Government decided that that, too, had to go. Then they realised that they had to replace that with a quarterly payment system on corporation tax, which they announced in November 1997; and because they got that wrong, too, they had to revise it in March 1998.
We welcome the mitigation of the measures announced by the Government in November 1997, and the improvements for small companies that were introduced when they finally brought this child to birth in March. However, like the Confederation of British Industry, we condemn the overall impact of the Government's changes on the cash flow of the company sector, and of major companies in particular.
According to the Government's figures, clause 30 will raise £6.8 billion from companies this Parliament. The accompanying 1p rate cut in corporation tax will return to companies just £1.7 billion of that £6.8 billion. The net impact of the clause on corporate sector cash flow will be £5.1 billion. I should be grateful if the Paymaster General would confirm that figure now, or when he gets back to the Dispatch Box. He may not be listening, but can he confirm that the net effect of the clause is to lift £5 billion from the cash flow of the corporate sector and take it to the Treasury, as a result of bringing forward payments that companies would have to make, through the advance system of corporation tax payments, on all their profits?
Let us have no more from the Labour party about the supposed reductions in corporation tax because of changes in the corporation tax rate, such as those that the hon. Member for Brent, North (Mr. Gardiner) just mentioned. Let us have a clear statement today that, when the Prime Minister denied that there was any increase in corporate taxation, he was misinformed and was, therefore, misinforming the House. Let us have a clear admission that the Government are adding further to the burden of business, on top of the previously announced taxes, on top of the high interest rates that have been introduced in this Parliament and on top of the crippling exchange rate,


all of which are already precipitating manufacturing into recession. These burdens of taxation will make it spread all the more rapidly to the rest of the business sector.

Mr. Ross Cranston: Is it not the case that the quarterly system of corporation tax payment operates in the United States, Germany, France, Australia, Canada, Japan and a host of other countries, and that we are simply coming into line?

Mr. Lilley: I was just about to say that we have no objection in principle to a quarterly payment system; it is the use of that system, by arranging the transition to bring forward into this Parliament payments that previously would have been made years ahead, that is so iniquitous and devious. If the hon. Gentleman had had the courage to admit that it was being done to raise extra taxation rather than to smooth spending over the year, I should have had more respect for him and the Labour party.
We have no objection to a system of quarterly payments—something like that became inevitable once credits, foreign income dividends and the advance corporation taxation system on dividends went—but we object to it being used as a back-door method of increasing taxes on the business sector by stealth.

Mr. Dale Campbell-Savours: In the right hon. Gentleman's view, could we have had reduced revenue coming into the Exchequer while we had the reduced interest rates that the right hon. Gentleman has been calling for? Could we have had both together?

Mr. Lilley: I believe that, if we had encouraged, not discouraged, saving, it would have made it easier for the Bank of England to achieve a given inflation target with less emphasis on high interest rates and high exchange rates. By not taking steps to encourage consumers to save, but allowing the burden of taxation to fall on business and savings, the Government have exacerbated the problems that they diagnosed when they came to power.
Our amendment No. 1, which has not been selected for debate, would have required the Government, in introducing a quarterly payment system, to ensure that it did not result in any net take-out of companies' cash flow. It would have ensured that the effects of the system were fiscally neutral, and that the Government adjusted the timings and the transition period to ensure that.
As amendment No. 1 has not been selected, we shall vote against clause 30, and I shall invite the Committee to join us. Apart from the fact that clause 30 raises taxes by stealth, the most objectionable feature of the Bill and the clause is that they rely on the wholesale use of regulation-making powers, so that the Government can introduce complex but important measures in a way that cannot be amended, and which, in many cases, will not even be debated.
Hardly any of the key parameters of the new system of corporation tax payments are spelt out in the Bill. The Institute of Directors rightly protests:
The dates on which tax is payable and any associated penalties are fundamental matters, which should be dealt with in primary legislation:'
They are not. Why have not the Government spelt out in primary legislation the key parameters of the system that they are introducing, to allow hon. Members the

opportunity—preferably on the Floor today, but if not, later, in Standing Committee—to examine and consider the proposals. and to reflect in that debate representations from outside the House about the detailed proposals?

Mr. Cranston: Will the right hon. Gentleman give way?

Mr. Lilley: I shall continue with this point, if I may.
It is essential that we find out the Government's intentions, or that we ascertain that, in this respect, too, they have not yet thought out their plans, just as, when they announced the abolition of tax credits, they had not thought that it would make necessary a new system. Is it further evidence of their botched, muddled failure to think through their taxes when they make their announcements?
I shall happily give way to the hon. Member for Dudley, North (Mr. Cranston). If he is true to his duty as a Back Bencher, he will want to debate such measures in detail rather than pass them on the nod in the contemptuous way in which the Government sideline Parliament whenever they have the opportunity.

Mr. Cranston: I thank the right hon. Gentleman for giving way again. Did he in his long experience, including at the Treasury, never propose legislation containing a regulation-making power?

Mr. Lilley: I cannot remember proposing a clause containing 11 separate regulation-making powers. Not a single detail of the Bill has been spelt out or published previously so that the Committee would know what regulations would be made under the clause. The amendment would ensure that Parliament saw drafts of the regulations and voted on a resolution before the regulation-making process was completed.
Labour Back Benchers are numerous and could use the time on their hands to good effect by considering legislation properly and in detail, which is what their constituents sent them to Parliament to do, rather than letting Ministers bypass them and Parliament by taking general regulation-making powers that suggest that they do not even know what they intend to do. We shall listen intently to the Paymaster General for evidence that he knows what he intends to do any more than he and his colleagues did when they started the process nine or 10 months ago.

Mr. Malcolm Bruce: The right hon. Member for Hitchin and Harpenden (Mr. Lilley), who leads the Conservative Treasury team, has worked himself into a synthetic stour about the clause. The Government's basic proposals have been out for consultation for several months, and, although hon. Members are entitled to ask for clarification of the legitimate concerns to which the right hon. Gentleman referred, I do not get the impression that there is enormous fulminating opposition to a measure that most business people acknowledge as reasonable in principle.
The Government's claim to want to open up the Budget process to greater debate, consultation and transparency is a genuine issue, however. The Chancellor announced the abolition of advance corporation tax and the introduction of quarterly payments in his pre-Budget statement, but did not say that there would be a substantial cash flow benefit.


The Paymaster General will have to acknowledge that there will be a net flow of funds into the Treasury in the lifetime of this Parliament, and of the order of that to which the right hon. Member for Hitchin and Harpenden referred. In the interests of transparency and genuine debate, the Chancellor should have been more forthcoming about the cash flow benefit that the Government would achieve compared with the overall effect of the reduction in tax rates.
The measure will have a more severe impact on some businesses than on others. As regulations will be made, the Minister should say whether variations or adjustments will take account of the skewed revenue flows of some businesses, which could make quarterly payments a hardship. Most ordinary taxpayers who pay tax as they earn appreciate that paying tax substantially in arrears is beneficial because a company has use of the money on which it is liable to pay tax for a considerable period before paying it.
The Paymaster General should give hon. Members guidance, because it is difficult for some businesses to determine the outcome on which they would pay tax. Some businesses will pay additional tax over and above their liability, so it would be useful to know what negotiation and flexibility there may be in calculating quarterly rates to take account of variations.
5.15 pm
My plea to the Government is to follow through what I accept as a sincere intention to have a more genuine, open debate about taxation priorities. They have not got the balance right yet, and I had hoped for more consultation on other issues in the Bill. In their first Budget and in the pre-Budget statement, the Government introduced two substantial taxes on the corporate sector from which they have benefited substantially in revenue flows without being up-front in the Red Book or in overall projections, which would have enabled us to have had the sort of debate to which we are entitled. The Government would help hon. Members and business if they set out the real effects of the tax changes and how the balance between personal taxation and business taxation will settle.
The Paymaster General cannot be surprised that there is criticism of and cynicism about the fact that the Government thought that they could get away with substantial extra taxes on business while standing by their assurance that they would not increase the basic or higher rates of income tax. He and hon. Members will know that my party takes a different view and believes that both rates should have been increased by an agreed amount for specific purposes. [Interruption.] We have said specifically what we would do.
The Paymaster General may not have read our publication, though it must have been passed to him many times. I shall repeat what it says, at the risk of detaining the Committee—even the Prime Minister would benefit from reading the Official Report occasionally. We proposed a rate of 50 per cent. on personal incomes in excess of £100,000 and an additional 1p on the standard rate of tax to fund a reduction in tax for people on lower wages by raising thresholds and extra investment in

education year on year throughout this Parliament. Labour Members would do themselves and their party good if they accepted my argument.

Mr. Campbell-Savours: Will the hon. Gentleman give way?

Mr. Bruce: Not until I have finished this point.
The Government are on record as saying that they want genuine public debate, but they are not happy when other people hold a different view from theirs and they do not always explain the full implications of their policy changes, let alone the forward projections.

The First Deputy Chairman of Ways and Means (Mr. Michael J. Martin): Order. The hon. Gentleman is going wide of the amendment. Government policies are not being debated; there is an amendment before us.

Mr. Bruce: I accept your ruling, Mr. Martin. The amendment asks for a statement of impact, and I am balancing the argument. The Government should state the net effects of the changes and their forward projections.

Mr. Campbell-Savours: The hon. Gentleman said that 1 p should be put on the standard rate of tax and that the rate should be 50 per cent. on incomes of over £100,000 to fund a lower threshold and education spending.

The First Deputy Chairman: Order. We have the amendment before us, although it is perhaps different from the one being discussed by the hon. Gentlemen. The amendment that we are discussing mentions a draft of regulations being laid before Parliament. We should talk about that, not about what the Liberal Democrats wanted to do at the last election, which is nothing to do with the issue before us. The hon. Member for Workington (Mr. Campbell-Savours) should be seated.

Mr. Bruce: I take your strictures, Mr. Martin. I may have strayed somewhat, but I think that the Paymaster General has got the drift of my argument. The right hon. Member for Hitchin and Harpenden said that he wanted detailed regulations because he was concerned about the impact of the change and the Government's lack of transparency in introducing it. I do not think the amendment very practical; when the Conservatives were in government, we had debates on similar amendments, only they were tabled by the opposite quarter.
I hope that, from now on, the Government will recognise the need for people to know the precise impact of measures on their businesses, as well as the likely impact on the national finances. In the interests of open government and of wider debate, it would help us to have more information from the Paymaster General.

Mr. Nick Gibb: The hon. Gentleman describes the need for a wider debate on Finance Bills. May I take it from that that he and his colleagues will attend each and every sitting of the Finance Bill Standing Committee? During last year's one,


they flitted in and out at whim, and I rarely saw the hon. Gentleman take part. Will he and his colleagues play the part of a proper Opposition this time round?

The First Deputy Chairman: Order. That has very little to do with the amendment.

Mr. Bruce: On a point of fact, I was not a member of the Finance Bill Committee last year, so I would have found it difficult to take part.
May we have some specific assurances from the Minister on how the regulations will affect the businesses that may encounter problems? Secondly, what will the overall impact of the regulations be?

Mr. Charles Wardle: Before the hon. Member for Gordon (Mr. Bruce) outlined the shape of a Liberal Democrat Budget, he seemed to chide the Minister gently for not disclosing the cash flow benefit to the Treasury of these changes. What my right hon. Friends and I object to are the cash flow disadvantages over the next few years to companies bigger than small and medium enterprises, or SMEs.
I hope that the Minister will help to clarify a certain definition. When looking at clause 30 it has been helpful to look also at the glossy version of the Red Book, "New Ambitions for Britain". Paragraph 4.19 says that the Budget will exempt SMEs from quarterly corporation tax payments to improve their cash flows, but paragraph 4.18 implies that that refers to companies with 50 employees or fewer. The paragraph states that the Treasury says that 99 per cent. of the UK's 3.7 million businesses have 50 or fewer employees, and that those businesses account for 46 per cent. of jobs and 42 per cent. of aggregate turnover. That immediately precedes the point about exemption, but I believe that I saw in a press release at the time of the Budget a suggestion that the definition of a small company was one with profits of up to £300,000 before tax, and that a medium-sized company was one with pre-tax profits of between £300,000 and £1.5 million. I see the Minister nodding, but it would be helpful to have that clarified. It would be boring to have to wait for regulations which we may or may not have the chance to debate before finding out precisely who will benefit from the exemption.
I should like to outline two types of management problem which might affect a large number of businesses in the transition period. I accept that quarterly corporation tax payments are made in many other countries. What concerns us today is the transition period, the hit on companies, and the hitherto hidden benefit which my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) has so admirably disclosed.
The Minister and other hon. Members with management experience will appreciate the examples that I am about to describe, but I hope that they will bear with me because it is important to illustrate what problems might arise in the next four years.
My first example refers to the rapidly expanding company. Let us assume that it has got off the ground with great success. It has shot past the upper limit definition of an SME and has continued to expand rapidly. There is not a business person who does not know that the risk of company failure and receivership is at its greatest when companies embark on ambitious programmes of

expansion without sufficient capital backing. Business history is littered with examples of entrepreneurs who got off to a good start with a great marketing idea for a new product that attracted sudden and rapid demand.
That company buys in more raw materials and puts more into work in progress and finished stock. As it expands, it finds that it has more money tied up in accounts receivable—in debtors—and that its suppliers are still insisting on tough terms. The company does not have a history long enough for a good credit standing, so the terms of payment for raw materials are still tough. Moreover, the bank insists on a tough overdraft limit; doubtless, the company does not have a freehold property, so there is little on which to secure an overdraft.
It is a familiar story. If companies in a period of rapid expansion are to risk becoming over-extended, cash flow is critical. Some of those companies will find that their overdraft limits are broken and that the banks are not tolerant, because they see little in the way of underlying assets. The companies will therefore be faced with receivership. Such circumstances are not uncommon.
That type of company will now be spending more management time on dealing with quarterly assessments of corporation tax payments in months seven, 10, 13 and 16—more time dealing with inquiries just when they should be fighting to consolidate themselves on a new plateau of stability following their rapid success.

Mr. Geraint Davies: Is the hon. Gentleman suggesting that the taxpayer should bail out high-risk, fast-growth companies in circumstances when no high street bank would dream of doing so?

Mr. Wardle: I am suggesting nothing of the sort. Indeed, I am saying that the banks take their fair share of risk. I also say that this is not the time for a Government who insist that they are business-friendly to impose further pressures on rapidly expanding companies.
My second example concerns the established company with a remarkable success in export markets—there are many of them about. Because of the persistently strong pound, they find those markets eroded; whereupon, they do all the right things: trim their sales prices, suffer lower margins, trim their overheads, and possibly even let some staff go rather than tie up cash flow in stock and finished goods.
Such companies, facing those pressures in an increasingly competitive export market, will find the requirement for quarterly payments of corporation tax, introduced so rapidly, an additional burden.

Mr. Cranston: rose—

Mr. Wardle: I shall give way to the hon. Gentleman, provided that he will tell us about his business experience. I understand that he is a solicitor.

Mr. Cranston: I am not a solicitor: I am a member of the Bar. Only 2.8 per cent. of companies, 20,000 of them, will have to make the quarterly payments. It seems to me that the hon. Gentleman is making a good argument for a regulation-making power, not a piece of bland legislation, to cover all these different types of company.

Mr. Wardle: No. With the typical skill of a barrister, the hon. Gentleman does not illustrate to the Committee the sort of companies involved. Those 20,000 companies represent the engine room of Britain. It is vital that companies that have been successful in export markets and are now feeling the pinch, or companies that have been expanding rapidly on the back of a good idea and have gone beyond the protection that the Minister rightly intends to provide for SMEs, should be examined by the House of Commons to see the proposals' effect on them in the crucial next three or four years.
How can the Minister justify quarterly payments that add to paperwork and intrude on management time that should be devoted to market success? How can he justify the hit of £1.6 billion in the first year and £2 billion on company cash flow in the next two years, if the Government are supposedly business-friendly?
Finally, I draw the Minister's attention to a point that was raised time and again on Second Reading, as well as in the financial press. Long though the Bill is, it is full of references to regulations that are to be made subsequently. Clause 30 is a classic example of that. Ministers and the Inland Revenue will have a free hand to be as creative or as repressive as they choose in making regulations. By not writing into the Bill the substance of those changes, the Government make a mockery of their accountability to the House.

Mr. Quentin Davies: Before I deal with the substance and the merits, or otherwise, of the amendment and the clause, I draw to the attention of the Committee and, I hope, of an increasing number of people outside who have not yet focused on what is going on, the extraordinary degree to which the drafting of the Bill represents an invitation to Parliament to abdicate its responsibility for deciding on the taxes to be levied on the British people.
As you know, Mr. Butterfill, I have served on Finance Bill Committees for several years. On many of those Committees, I had the pleasure of serving with you. I have never read clauses that were so open-ended in providing for the Revenue to make up our tax laws as it goes on.
Clause 30 states:
The Treasury may by regulations make provision, in relation to companies of such descriptions as may be prescribed, for or in connection with treating amounts of corporation tax for an accounting period as becoming due and payable on dates which fall on or before the date on which corporation tax for that period would become due and payable".
What does that mean? It simply means that the Treasury can write its own tax laws after Parliament has finished with the Bill.
Subsection (2) states:
The Treasury may by regulations make provision for or in connection with the payment to the Board of an amount or amounts determined by or under the regulations".
What can be clearer than that? The Treasury may by regulations make provision for amounts to be paid to be determined under the regulations. In other words, we give a blank cheque to the Revenue.
Similarly, schedule 4, which refers to new section 59E, states:
The Treasury may by regulations make provision modifying section 826(2) in relation to companies of such description as may be prescribed.
In other words, the Treasury will have the right to change existing tax law—in this case section 826(2)—and substitute more or less whatever it wants.
That is not hyperbole. It is what the Bill would allow. Such arbitrary taxation is associated with the Turkish empire, perhaps, but not with a free society and a regime in which the representatives of the governed discuss in detail, debate and determine the basis on which the public should be taxed. Parliament cannot pass the clause this evening and look itself in the face tomorrow morning.
When I read these clauses, I thought that it might be much easier if the new Labour Government, with a majority of 179 over all other parties, decided that they could do what they pleased with the House, and introduced a one-line Bill allowing the Treasury to impose such taxes as it wishes. [Interruption.] That is what is happening under the clause, which states that the Treasury shall impose such corporation taxes as it wishes.
I see some of the Labour Members who make up that absolute majority of 179 over all other parties sitting in the Committee this afternoon, not trying to take part in the debate—we have heard three contributions from the Opposition, without any interruption—but laughing. Perhaps they think that they were sent to this place to do whatever Walworth road or the Whips or No. 10 tell them, and not even to look at the implications.
The clause represents a sad and dangerous precedent. In a sense, it does not much matter what taxes we have, whether they are too high or too low, whether they are good or bad, if Parliament has considered them in detail and Parliament can subsequently amend them. However, we are invited this afternoon to hand over our own judgment to unelected officials in the Treasury and the Revenue.
We must read the Bill in conjunction with press releases from the Revenue, telling us what it might be minded to do if it were given the powers which, with the Government's majority, we know that it will be given. If one examines the Government's intentions under the clause, serious pragmatic issues for British business arise.
I reinforce the comments of my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) about the way in which the corporation tax provisions in the Bill are used to impose a surreptitious and covert increase in the burden of corporate taxation. The figures are in the Red Book produced by the Government.

The Paymaster General (Mr. Geoffrey Robinson): indicated assent.

Mr. Davies: I see the Paymaster General nodding. I wonder whether he will have the courage to quote the figures. In all the discussions that we have had on the Bill since the Chancellor's Budget speech, the Government have never done so. They have never drawn attention to the actual increase in the burden of corporation tax. They have disingenuously implied that the Budget relieves the burden of corporation tax. It does not. Although there is an apparent reduction in the rate of corporation tax, that


relief, as my right hon. Friend pointed out, is more than compensated for by the cash flow effect of introducing quarterly payments of corporation tax.
The Paymaster General is leafing through his papers. I can tell him what the figures are. In the first financial year in which the provisions will apply, 1999–2000, the net burden on industry will be £1.6 billion; businesses will pay more in corporation tax, taking into account the apparent relief through reduction of the rates but the increase in the burden because of the acceleration of payments through quarterly payment. In the following financial year—I shall give way to the Paymaster General if I am wrong in quoting from the Red Book, but he knows that I am not—the net incremental burden on business will be £2 billion. If the Labour party has the slightest respect for the facts and the slightest inclination to be straight with the British people, it should not claim that the Budget reduces the corporate tax burden. This Budget increases that burden by a significant amount of money.
Let us turn to the merits in principle, irrespective of what is raised as a result of levying corporation tax on this new basis. I agree with my right hon. Friend the Member for Hitchin and Harpenden: I do not object to quarterly payments in themselves, but quarterly payments of what? The Government are introducing for the first time in tax law quarterly payments of tax for which a company is liable in the current year. In other words, companies will have to predict their profits for the current year and pay—not just make notional provisions in their accounts—those sums of money during the year in which those profits are earned.
That is an extraordinary state of affairs. At present, income tax payers who come under schedule D make payments twice rather than four times a year, on the basis of the profits on their earnings for the previous year. They know what the position is: they have closed their books for the year in respect of which they are making payments. They know the profits or the earnings on which they will make payments and they have received those profits or earnings. That is not the position here: this is a dramatic step and a dramatic change in British tax law.

The Temporary Chairman (Mr. John Butterfill): Order. I hope that the hon. Gentleman will start to address the substance of the amendment, as he is ranging rather wide of it at the moment.

Mr. Davies: When we are debating amendments to the Finance Bill, there is always slight confusion as to whether the Chairman will permit a subsequent clause stand part debate. If he decides not to do that because the discussion of previous amendments has ranged fairly widely and one has points that relate to the principles of clauses, one may find that one has lost the opportunity to put those points. I am in a difficult position as I know that Chairmen are sometimes reluctant to give guidance in advance as to whether they will allow a clause stand part debate. Perhaps you can help me, Mr. Butterfill.

The Temporary Chairman: I shall make that decision when I have heard what has happened during the debate. It is normally my practice to give guidance earlier if hon. Members have demonstrated that they wish to speak fairly widely on the amendments. At present, I propose that we have a clause stand part debate. Perhaps the hon.

Gentleman could confine his remarks a little more closely to the clause under discussion—although I shall show a certain amount of tolerance.

Mr. Davies: I am grateful to you, Mr. Butterfill. I was trying to be guided in the extent to which I went wide of the amendment by the precedents that have been set in the discussion. I thought that I was not exceeding the margins that were established by earlier contributors, but perhaps I am in error. Nevertheless, I am sure that you would agree, Mr. Butterfill, that the essence of the clause and every amendment to it is that we are facing a dramatic—and, I believe, an extremely damaging—change to the way in which companies are taxed.
There are certain specific and pragmatic reasons why the concept cannot work in practice. That point has been made already, so I shall add to it. It will do even greater damage to the interests of British industry because it is not possible to predict what one's profits will be in the current year. Even in a relatively non-volatile market, such as retailing, one does not know whether one will have successful January or July sales. One does not know whether the car market will turn up or down: it can be affected by unpredictable changes in interest rates or in Government policy.
In other areas of business that are inherently much more volatile, profits are even more difficult to predict. For example, how could a company that has been exporting to Asia in the past year have predicted the collapse in the Asian markets? That will have had a dramatic effect on its profits. How will an insurance company know whether extraordinary claims will be made on it? It is like predicting the weather—and if a company is in the property insurance business, the weather will determine the claims on it to some extent.
There is something particularly curious about the concept of quarterly payments of corporation tax that is assessed on current year profits. It is an established fact that companies are very cautious about making profit projections for the current year. If they must pay tax to the Revenue on their profits in the current year, they cannot disguise their position from the market or from their shareholders. It is an established principle in financial markets that it is extremely dangerous to make those kinds of profit announcements, yet it follows that all British companies will have to make yearly statements on the stock exchange about their anticipated profits for the current year. As it is in the nature of things that companies will not achieve those profits—their actual profits may represent a substantial increase or shortfall on the figure predicted—the stability of financial markets will be undermined. False markets will occur and people will drive company share prices up or down for no reason. I shall give way to the hon. Member for Croydon, Central (Mr. Davies) who shares my name.

Mr. Geraint Davies: I am honoured. I thank the hon. Gentleman for giving way. Is he aware that the 20,000 companies—or 2.8 per cent. of companies overall—that will be affected are large, sophisticated companies? Is the hon. Gentleman aware that the system allows a certain amount of flexibility—profit projections and re-evaluations will be conducted each quarter on a rolling basis? Companies of that magnitude of sophistication and


success will obviously have their own accountants and will be able to accommodate quite easily the sorts of changes that the Government are introducing. Therefore, the single point that the hon. Gentleman has made for the past five minutes is wrong.

Mr. Quentin Davies: I think that the hon. Gentleman's comments would cause surprise—and possibly even derision—in most boardrooms in this country with which I am familiar. One is able to predict one's profits not because one has sophisticated company management but because one is able to predict the factors that will determine those profits. I have given several illustrations of that point already—I can give more, but I might go slightly beyond the margins that you have laid down, Mr. Butterfill.

The Temporary Chairman: Order. The hon. Gentleman has already gone so far outside those margins that the chances of a clause stand part debate are diminishing by the minute.

Mr. Davies: I see that I shall be blamed for anything that goes wrong in the debate. However, I am at least released from some of the constraints that were imposed on me a few moments ago.
The fact is that no company can predict what will happen in its markets. Every company deals with uncertainty. Companies may have complete control of everything that it is in their power to control, but they cannot control the behaviour of their customers, what happens to interest rates or the general economic and physical climates. Few companies feel able to make profit projections for their shareholders—or for any other purpose—or public statements of what their profits are likely to be 12 months ahead. The reference to the 20,000 companies that will be affected has cropped up several times in the discussion: several Labour Members have intervened to cite that figure. I suppose that it must be in the Walworth road handout about this clause. It represents a certain naivety.
If the clause were designed simply to impose a new corporate tax regime on the Financial Times 100 companies—the top 100 companies-it would have a considerable economic impact. Those companies already deliver a substantial proportion of the United Kingdom's gross domestic product. However, the provision is not confined to the FT 100, 500 or 1,000; it applies to the top 20,000 companies. If a Government want a particular tax regime to have a major economic effect, they will want to levy it on the top 20,000.
It is extraordinary that the hon. Member for Croydon, Central should have been deceived by the Walworth road handout into asking such a question. The hon. Gentleman knows well that the majority of companies are one-man or one-woman businesses, and that the output of such companies may be very small.
The clause is drafted so as to undermine the responsibility of Parliament for the aspect of taxation to which it relates. It is—

Mr. Cranston: Will the hon. Gentleman give way?

Mr. Davies: I shall not give way. I want to encourage the hon. Gentleman, if he really has something to say in

this debate, to say it in his own speech. Labour Members have come to the Chamber with a Walworth road handout and have made, in many instances, ill-thought-through comments. They have not yet made a substantive contribution to the debate. Indeed, they have not shown the slightest inclination to want to do so.
We are faced with extremely bad tax law. If Parliament accepts the precedent that has been put before it, Parliament should be ashamed. The clause will lead to an additional general burden of corporate taxation, which is the last thing that the country needs. It will also impose on companies the complete absurdity and artificiality of having to predict their profits, when, by definition, profits cannot be predicted because they are subject to uncertainties outside the control of companies. That is, by definition, unreasonable and unfair. I look forward to hearing whether there is a rationale for any of the extraordinary proposals that are set out in the clause. Will Labour Members tell us what that rationale is?

Mr. Gibb: Clause 30 is the latest stage of incompetence in a saga that stems from the July Budget, when the Chancellor of the Exchequer decided to abolish the repayment of dividend tax credits to taxpayers generally and to pension funds in particular.
That decision was designed to raise about £5 billion a year by the back door, and in a way that the Government hoped would not be noticed by the public. However, it has been noticed by the public, because it is the public who have to pay. They will have to pay, on average, an extra £200 a year in higher pension contributions. Gavyn Davies, in his evidence to the Treasury Select Committee in March, said that the abolition of dividend tax credits has been paid for by the household sector. He said:
The ACT change has fallen, eventually I believe, on the household sector. We have scored that as a household tax increase in our rankings.
Clause 30 has been introduced to clear up the problems that have been created by that decision.
When the Government announced the end of the repayment of dividend tax credits they realised that it would lead to a spate of payments of foreign income dividends. That was because if pension funds were no longer to receive the tax credit, they might as well receive FIDs. As a result, FIDs were introduced to enable companies to pay dividends to their shareholders out of foreign earned profits without having to account for ACT. This ACT could not generally be offset against a company's mainstream corporation tax liability because there is generally no UK tax that is payable on such profits as a consequence of double tax relief.
As no ACT is paid on FIDs there is no tax credit available to the recipient of a FID. Until last July, therefore, pension funds were not very keen on receiving FIDs. They needed to be able to claim the tax credit. However, after July, FIDs became attractive since the repayment of dividend tax credits has been abolished in any event.
The Government recognised that there was a potential long-term problem. That being so, they announced that FIDs would be abolished. There was an outcry from Britain's multinational companies. Already there are £7 billion of unreclaimed ACT at cost to British industry. The Government are effectively saying now that those moneys can never be reclaimed.


After various non-starter proposals made by the Paymaster General in the debates that followed the Government's decision, the only solution that the Government could come up with was to abolish the entire ACT system—the entire imputation system that had been in place since 1972. That, of course, would lead to a huge cash-flow cost if companies' advance payments of corporation tax were abolished. That is why we had the consultation document in November on the proposals that we now see in clause 30 for quarterly payments of corporation tax.
Unfortunately, that is not the end of the tale of incompetence and of ill-thought-through proposals. I believe that there is a serious shortage of competent Ministers in this Government. Those who are competent find themselves doing more and more work so as to carry their less able colleagues. Thus mistakes, or errors, proliferate even among the few competent Ministers that the Government have. I see the Paymaster General nodding. I wonder which category he sees himself falling into.
The supplementary memorandum from the Treasury is to be found at page 82 of the fourth report of the Select Committee on the Treasury. It points out that the Treasury had underestimated the number of FIDs that would be paid instead of normal dividends as a result of the July changes in ACT. The memorandum reads:
Although the July 1997 forecast allowed for a rise in the use of FIDs by companies with surplus ACT, following the abolition of tax credits to pension providers the subsequent use of FIDs was greater than expected.
It was clear to everyone—

Mr. Quentin Davies: I listened to my hon. Friend's quotation with some interest. It is obvious that the Revenue is not particularly good at forecasting the revenue that it will receive at the end of any given current year. That being so, why does my hon. Friend suppose that the Revenue should expect companies to be better at forecasting their revenues?

Mr. Gibb: My hon. Friend makes a telling point. It is incredible that the Revenue failed to predict that there would be more FIDs paid as a result of the decision that was made last July. Everyone knew that there would be more and more FIDs and that there would be a rush to use FIDs as it was no longer possible to reclaim tax credits on ordinary dividends. Why did the Government underestimate the effect of their decision?

Mr. Cranston: Will the hon. Gentleman comment on a quotation from an accountant, John Whiting, tax partner at Price Waterhouse, who commented on the point raised by the hon. Member for Grantham and Stamford (Mr. Davies) when he would not let me intervene. Mr. Whiting said:
This is a pain—but the whole scheme is much fairer. It does show that they"—
the Government—
have listened to some of the arguments put during consultation.
What is the comment of the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) on that?

Mr. Gibb: The hon. Gentleman will be aware of other leading tax accountants, who say that we are getting perilously close to some constitutional issues by the fact that the Government are legislating a major reform to the corporation tax system through regulation. Such a reform is unprecedented, and the accountancy profession is dismayed at what is happening.
The underestimate of the amount of FIDs paid is not tiny or minor. Indeed, it amounts to about £2 billion. Errors or mistakes seem to proliferate in clause 30 and in the consultation document that heralded it. Paragraph 4.28 of that document refers to charging interest to taxpayers from the date that the Inland Revenue receives funds from taxpayers. Should not that be interest charged until the Inland Revenue receives the funds? That is a minor error, but one which is indicative of the competence level and lack of attention to detail that reflect on the Government and on the consequences of what they are proposing. Perhaps that is why clause 30 contains no details of the workings of the new corporation tax system but only paves the way for future Treasury regulations. The Chancellor hyped the reform to the corporate system as a once-in-a-lifetime, fundamental reform, so it is astonishing that it is not included in the Finance Bill.
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The Government's intention to legislate for a new corporation tax system through secondary legislation, subject only to the negative resolution, is a disgrace. It is unprecedented for changes in tax legislation, other than details of administration, to be enacted other than directly through an Act of Parliament. The introduction of a new corporation tax system does not constitute merely an administrative matter but goes to the very heart of how much a company will pay and when.
Legislating through statutory instruments on this matter is widely condemned by leading figures in the accountancy profession, the tax faculty of the Institute of Chartered Accountants in England and Wales, by the Institute of Directors and others. My former boss, Mr. Ian Barlow, head of tax at KPMG, said that regulations were normally used for detail and:
This sort of material should be in primary legislation.
Richard Collier-Keywood, a partner at Coopers and Lybrand, said:
I think we are getting perilously close to some constitutional issues.
The Institute of Directors said:
The dates on which tax is payable and any associated penalties are fundamental matters which should be dealt with in primary legislation. Only if they are in primary legislation can Parliament debate them properly and make amendments as appropriate.
According to the Financial Times, the reason for wanting to use regulations is that Ministers do not want to be seen to be making U-turns, but it is a bit late for that. However, what does that say about the competence of Treasury Ministers? Proposals, flawed as they are, were announced in a consultation document in November, some six months ago. Is not that an admission that the Government have yet again produced tax proposals which are not acceptable to those whom they affect, just as they are not acceptable to those who administer and understand the tax system or to the wider public?
If the Government believe that the corporation tax proposals in the consultation document, as amended, are flawed, and if they wish to change them, they should do


so. A change on the lines urged by Conservative Members and by industry would be widely favoured. Sneaking changes through by statutory instrument will not reduce criticism that the Government have yet again produced an ill-thought-out proposal which they were forced to change. If, on the other hand, the Government do not intend to change their proposals, legislating through regulation will not enable them to get away with introducing bad law without public criticism from the Opposition and from industry. They will achieve nothing from these antics, so I urge them to stop undermining the House, stop listening to their spin doctors, to put democratic procedure before presentation and sheen, and to accept the amendment.

Mr. Cranston: The hon. Gentleman is generous in giving way a second time. Has he consulted the draft regulations, which are available, and will he be commenting on them?

Mr. Gibb: I have not yet consulted the draft regulations, but, like industry, I look forward to examining them in great detail.
The errors that I have catalogued have led eventually to the quarterly corporation tax system and the abolition of ACT. When the repayment of dividend tax credits was abolished, FIDs had to be abolished. Their abolition has been causing huge problems with unrelieved ACT, and the only answer that the Government could come up with was the abolition of ACT. How were the Government to solve the problem that that created—the cash-flow cost to the Treasury arising from no more advance payments of corporation tax?
The answer, for the Government, is the quarterly corporation tax payment system set out in the consultative document, "A Modern System for Corporation Tax Payment". Of course, it is not modem at all; it has been a long-established practice in several countries. The proposals have been widely condemned, as one might by now have been expected, judging from the Government's track record on their tax proposals.
The Institute of Chartered Accountants said of the abolition of ACT:
We accept that in order to maintain Government revenues there will have to be a compensating acceleration of the payments of companies' normal corporation tax liabilities. We are, however, concerned that the detailed procedure for payment of corporation tax by instalments, as proposed in the consultative document, would be neither fair nor practical.
They are the words of the body that represents chartered accountants in this country.
The Government have already performed one U-turn on this issue by exempting small and medium companies from the burdensome proposals, but large companies remain subject to them. As my hon. Friend the Member for Grantham and Stamford (Mr. Davies) said, the consultative document and the notes on clauses state that the term "large" includes those companies whose profits are £1.5 million a year or more. That means 20,000 companies, some of which most people would not regard as being especially large.
Those companies will have to pay their corporation tax bills in four quarterly payments, beginning halfway through months seven, 10, 13 and 16. Therefore, for a

December year end company, which is the most popular accounting period, the first instalment will be on 14 July and the second on 14 October, both payments being before the year end. The third and fourth payments will be in January and April after the year end. There are transitional rules in place which limit the amount of corporation tax payable, but the changes will have serious cash flow effects on companies, notwithstanding the fact that they are being phased in over three years.
The new rules will affect accounting periods ending on or after 1 July 1999. For example, a December year end company will have to make the first quarterly payment, representing 60 per cent. of its annual tax bill, on 14 July 1999. On 1 October 1999, it will have to pay the whole of its corporation tax bill for 1998, and on 14 October—14 days later—it will have to pay the second quarterly instalment of its 1999 tax bill. That represents 130 per cent. of the company's annual tax bill being paid within just one year. That is why the Government are not only making up their cash flow shortfall as a result of the abolition of ACT, but accelerating its cash flow for the next four years as my hon. Friend the Member for Grantham and Stamford said—by £1.6 billion in 1999–2000, by £2 billion the following year, and by £3.1 billion the year after. It is cash that British industry will have to find and, in most instances, will have to borrow. As the Institute of Chartered Accountants said in response to the consultative document, this proposal
would require the company to pay tax on profits which it has not yet earned in cases where profits increase sharply towards the end of the accounting period. This would be a particular problem if there is a large capital gain close to the year-end, for example on disposal of a major subsidiary. Even if such an event could be predicted in month 7 (which is unlikely), we regard it as unreasonable to expect the company to pay tax on the gain, or to charge interest if it does not, before the proceeds have even been received.
The Red Book figures, which reveal £6.8 billion extra revenue for the Government over the lifetime of this Parliament, show just how the Government are using the change surreptitiously to raise further taxes, and significant further taxes. It is one of Labour's stealth taxes, and it will do nothing to help investment, nothing to encourage enterprises and nothing to encourage the creation of new jobs but everything to reduce investment and destroy jobs. Before the regulations are passed by an overwhelming majority, I hope that these criticisms will be taken into account.

Mr. Gardiner: Will the hon. Gentleman confirm that for small and medium companies that have been paying dividends—companies that he has been careful not to mention—the abolition will mean a net cash flow benefit of £1 billion?

Mr. Gibb: I did not refer to that point because we are debating large companies which constitute a substantial proportion of British industry. If one were to examine the aggregate turnover of those companies, I suspect that one would find that it represented more than half the turnover of all companies in this country.
One of the worst aspects of the proposed system is that it is based on a company's current year profits. Companies will have to calculate their first two instalments on the basis of their annual profits when the year has not been completed.


As the Institute of Chartered Accountants said,
The difficulty with this arrangement is that it is, of course, impossible to predict the tax liability for the current accounting period with any accuracy, at least until the period has ended. The problem is particularly acute for businesses such as property investment companies, whose profit is liable to rise to a significant extent from a small number of large transactions, whose timing relative to the next year-end may be unpredictable.
Of course, such unpredictable events can affect any company. It would make far more sense to base the quarterly payments on the company's prior year results and the statutory instrument should specify that, as does the income tax system for the self-employed and for sole traders.
The consultation document and the notes on clauses cite a number of overseas jurisdictions as examples of quarterly payment systems—Australia, Canada, France, Germany, Japan and the United States. However, the systems used in all those countries except Australia and the United States base instalments wholly or mainly on the previous year's tax liability.
Even in Australia and the United States, the system is not as uncompromising as that proposed in the Bill. For example, in the United States there are options to base instalments on the prior year's results with a top-up when the company files its tax return. There are also other methods for determining quarterly payments when companies have uneven revenues and expenses throughout the year. For example, there is what is known as the annualised method and the seasonal adjustment method for companies that generally earn at least 70 per cent. of their income in the second half of the year.

Mr. Quentin Davies: My hon. Friend will correct me if I am wrong, but is it not the case that in the United States there is no suggestion under any regime that chargeable gains would be included in the estimate on which quarterly tax payments had to be made? However, the new Labour Government appear to have included that in their proposals.

Mr. Gibb: I defer to my hon. Friend's expertise on that issue and I hope that the Paymaster General will note his comments, albeit that the regulations appear already to have been published.
It may be asked what difference will it make if a company underpays or overpays based on an inaccurate estimate as it can always increase or decrease subsequent payments accordingly. However, there is a penalty in that interest will be charged on any underpaid tax. Of course, it will also be paid on any overpayment, but there is a difference between the rates.
The consultation document originally referred to a gap of 3.5 percentage points. That gave rise to widespread criticism and the notes on clauses now say that
the interest on overpaid and underpaid corporation tax will be brought more closely into line with commercial rates of interest".
However, I understand that the interest charged on underpaid tax will still be 2 per cent. above base rate, which is very high, particularly for large companies that can usually borrow much more cheaply. Of course, the proposals apply to large companies. I hope that the Government will reconsider the issue and announce a more realistic commercial rate of interest, although the regulations have been published.

Mr. Geraint Davies: I have two quick questions for the hon. Gentleman. First, is he suggesting that it would

be better to base the taxation of a company on the figures for the previous year than on the forecast figures? If so, under the hon. Gentleman's proposals, a company facing declining profitability due to exchange rates, for example, would face penal taxation. Secondly, does he agree that an interest rate differential is a good idea as it encourages large companies to make accurate returns instead of giving them an incentive to underestimate their profits and, therefore, gain cash flow benefits from the taxpayer?

Mr. Gibb: I am grateful to the hon. Gentleman for that intervention. If a company's profits were less than those of the previous year, it could opt for the current year basis. The Government's proposals are uncompromising as they are based on current year profits and that is the end of the story. As for the percentage gap between the two interest rates, there will be a tendency for companies to overpay their corporation tax as a cushion against penal rates of interest. That will provide more revenue to the Government and put more of a cash flow burden on industry.
Basing quarterly payments on current year profits will clearly be unworkable and cumbersome for many companies. It will involve considerable uncertainty. The experience of jurisdictions that have a quarterly payment tax system is that companies tend to cushion the payments by paying more than they would otherwise to avoid penal rates of interest. The Government should avoid that.
Why are the Government so determined to go ahead with a system based on current year profits? Is it because they want to raise more revenue from the cushion, or is it because Treasury Ministers simply will not stand up to the Inland Revenue?
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The Financial Times says that tax experts believe that the Inland Revenue's large company anti-avoidance division has been instrumental in resisting pleas from companies not to shift to the current year basis.
It goes on to explain:
Tax inspectors are likely to monitor the payments, and sudden drops in tax liability will trigger investigations. This will act as an early warning system to spot anti-avoidance schemes.
In other words, the determination by the Government and the Inland Revenue to base payments on current year profits rather than the previous year's figures is driven by convenience. All the burdens and cash flow problems it will impose on British industry are simply to make the job of the Inland Revenue that much easier.

Mr. Gardiner: Will the hon. Gentleman give way?

Mr. Gibb: No. I have given way a number of times and I want to finish my speech.
We all want tax avoidance clamped down and companies to pay their tax according to the legislation, but there must be a balance between facilitating Inland Revenue inquiries and placing burdens on business. Requiring a quarterly payment to be calculated on the basis of current year profit is too great a burden.
One of industry's main concerns about the use of current year profits is that of market sensitivity, and calculating quarterly payments on the basis of estimated and unpublished future annual profit figures may well


result in information leaking into the public domain and increase the scope for insider dealing. Companies may not prepare taxable profits estimates except to calculate their quarterly payments. Giving such figures to outside bodies such as the Inland Revenue may well have that result. That is not my concern but that of British industry, including the British Retail Consortium.
There is enormous concern right across industry about the proposal to use current year profits and I hope that the statutory instruments will take that into account. I hope that the Government will listen to the Institute of Directors, which points out that a small underestimate of profit can lead to a failure to pay instalments because a company did not regard itself as large. When it eventually reaches the year end, it suddenly finds that it has made more than £1.5 million in profit. If it is a large company and does not make the quarterly payments, it is liable to pay a very large amount of interest. That view is echoed by the Institute of Chartered Accountants which states:
the definition of 'large' could itself be related to the size of the current-year tax liability and hence a relatively modest but unforeseen increase in profit close to the year end could result in a company being treated retrospectively as having been liable for payments on account of months seven and ten.
I wish to make one final point on the proposals that I hope will be borne in mind when the regulations are drafted. Although the Chancellor gave a commitment during the Budget statement that he would not raise corporation tax above the new 30 per cent. rate, we are all aware of the commitments that he gave before and during the general election campaign and the ease with which they were breached, rewritten and reinterpreted. "We have no plans to raise tax" became a commitment not to raise income tax when the July Budget revealed a £5 billion a year pensions tax. A commitment not to raise income tax became a commitment not to raise the basic and higher rates of income tax once a decision had been made to reduce the value of the married couple's allowance which increased millions of people's income tax bills.
The commitment on the rate of corporation tax is hardly worth the paper on which it is printed, particularly in view of the Treasury's surreptitious decision not to fight the European Commission's proposals to harmonise business taxes. The only commitment that Treasury Ministers now give is to harmonise personal tax rates. They have dropped any reference to business taxes.
My concern, which is shared by the Institute of Chartered Accountants, is that calculating quarterly payments is rendered uncertain not only because it is based on future results but because, under the current proposals, its payments on account could be rendered insufficient retrospectively if an increase in the tax rate is announced that affects all or part of the current accounting period. Other changes in tax law could have the same effect. Will the Paymaster General confirm that if an under-payment is a result of a change in the rate of corporation tax or a change in the law, no interest, overdue tax or other penalties will be charged? Will he ensure that that is incorporated in the statutory instruments?
I have raised one or two concerns that are shared by those outside the House. It is wrong that a major change should be introduced through secondary legislation.

I hope that the Paymaster General will confirm that the regulations will be debated on the Floor of the House, as proposed in the amendment, or, at the very least, in Standing Committee. I hope that the concerns raised by me and others about the proposals set out in the consultation document will be reflected in the statutory instruments.

Mr. Geoffrey Robinson: I fear that I shall be unable to reply to all the points that Opposition Members have raised, although if such a wide-ranging debate on the amendment means that we are not to have a clause stand part debate, I could range more widely.

The Temporary Chairman: In view of the wide-ranging speeches that we have heard, it would not be appropriate to have a clause stand part debate.

Mr. Robinson: In that case, I can reply more widely. I am grateful for your guidance, Mr. Butterfill.
The right hon. Member for Hitchin and Harpenden (Mr. Lilley) bemoaned the fact that amendment No. 1 has not been selected. I congratulate him on tabling an amendment on this occasion. When we started proceedings on our first Budget and were debating the windfall tax, it was beyond the competence of the Opposition to table even one amendment.
The hon. Member for Gordon (Mr. Bruce) made the point, which was reiterated several times by other Opposition Members, that there is something surreptitious about the way in which we are introducing the measure.

Mr. Malcolm Bruce: There is a lack of transparency.

Mr. Robinson: The hon. Gentleman may say that, but all the figures were published not only in the Red Book but in the pre-Budget statement in November, when we set out clearly, for consultative purposes, our plans for advance corporation tax. I refer the hon. Gentleman to section 9 on page 19 of that consultative document, issued by the Inland Revenue on 25 November 1997. I also point out that the figures in that document were higher than those subsequently published in the Red Book.
The hon. Member for Grantham and Stamford (Mr. Davies), who has not been on top form this afternoon, said that there was something surreptitious or covert about the introduction of this legislation; but that could not be wider of the mark. We not only consulted but gave the figures on which we would consult so that there would be no lack of transparency and no misunderstanding. We reached broad agreement on that proposal.

Mr. Lilley: rose—

Mr. Quentin Davies: rose—

Mr. Robinson: I shall give way first to the right hon. Member for Hitchin and Harpenden, and then to the hon. Member for Grantham and Stamford.

Mr. Lilley: If the Paymaster General is being open and transparent, will he confirm here and now, on the record, that the net cash raised for the Treasury over the next four


years—the lifetime of this Parliament—as a result of the clause will be just over £5 billion? Or he is trying, like his colleagues, to slip out of putting that on the record?

Mr. Robinson: The right hon. Gentleman is being nothing short of ridiculous. We published higher figures for the cash flow impact in the transitional period. There is bound to be a cash flow impact when moving from the present system of advance corporation tax to an instalment system. We made that clear and did not try to dodge the issue. We discussed the matter with the CBI and industry, and with international as well as domestic companies. They could see that it was a principled reform with inevitable consequences in the transitional period. They understood that we had a long-term interest in stability and low taxation rates and that reducing the rate of corporation tax for large companies and small companies to 30 per cent. and 20 per cent. respectively—the lowest figures ever—would have a major net present value to the companies. That is why we have had considerable support for our proposals.

Mr. Davies: My complaint was not that the figures were not published in the Treasury's document—I said in my speech that they were in the Red Book, which I quoted—but that although the figures were there for those who wanted to find them, the Government, and not only the Paymaster General, were disingenuously pretending that the effect of the Budget was to relieve the corporate sector of part of the existing burden of taxation when the reality was the exact reverse. My complaint was not about the figures in the Treasury's document, but about the deceptive spin put on them by the hon. Gentleman and his colleagues.

Mr. Robinson: The hon. Gentleman misses the point. Not only did we try not to present the measure in that way, but we consulted on figures that clearly showed what the transitional impact would be. One could not be more straightforward or transparent than that.

Mr. Lilley: The Paymaster General could be more straightforward and transparent and not dodge the question. Is it correct that the extra tax raised as a result of the clause will be £5.1 billion over the next four years? Is that true or false? Will he confirm that? Why is he dodging the question? Why is he refusing to put that answer on the record?

Mr. Robinson: Even the right hon. Gentleman can read. He can read the Red Book, just as everyone else can—although he may not know the difference between cash flow and tax. To be precise, this is not a tax. The taxes are being reduced and the cash flow impact is negative. We made the effect clear back in November. That gives the lie also to Conservative Members' claim that the two parts of the major corporate tax reform were not seen as a whole.

Mr. Lilley: rose—

Mr. Robinson: I shall not give way again because the right hon. Gentleman will only repeat, ad nauseam, the silly little point that he is trying to make. He knows that it is a silly little point and he knows that the figures were published and consulted on. He hates the fact that we have

the CBI's agreement for the measure and that our relations with industry are very good, and much better than those of the Conservatives in opposition or in government, but he must accept that. The right hon. Gentleman should be aware that the director general of the CBI wrote praising us for the fact that we had consulted and that we had removed medium companies from the instalment systems and made other adjustments.
The director general is clear that the principles of the reforms are accepted and supported by the large majority of companies in this country. That is what the right hon. Gentleman hates, but I regret to tell him that the Opposition have to learn that the Government—as we will discuss later when we come to individual savings accounts and other matters—are prepared to consult, to listen and to change policy, as we have done. That is nothing of which we should be afraid or ashamed. We recommend that the Opposition learn from that. Had they behaved more properly in that respect when they were in government, they would not have suffered such a disastrous defeat.

Mr. Quentin Davies: Will the Paymaster General give way?

Mr. Robinson: I have given way several times. I shall do so once more, but I hope that it will be a relevant point.

Mr. Davies: It is a relevant point, and I hope that the Paymaster General will deal with it. There is no point in the Government consulting unless they are prepared to explain why they are introducing measures. Why have the Government decided that it is appropriate for income tax under schedule D to be charged on a previous year basis, but corporation tax on a current year basis?

Mr. Robinson: We took that decision because we felt that, on the whole, it would be much more reliable and more appropriate for companies to forecast quarterly on a revolving basis. I do not know on which boards the hon. Gentleman sits or used to sit, but the idea that a company does not make a clear annual forecast against which there is monthly and quarterly reporting is just unbelievable.

Mr. Davies: rose—

Mr. Robinson: I have given way an awful lot and we must move on. I always give way to the hon. Gentleman, as he knows—although, quite honestly, I found some of the things that he said today utterly amazing. I shall now deal with some other points that were made in the debate and need some attention.
The hon. Member for Bexhill and Battle (Mr. Wardle) mentioned rapidly growing companies. There are precise provisions—I shall point them out—for rapidly growing companies that relate to whether they were smaller companies in the previous year or whether profits were as high as £10 million. That is a totally adequate provision.
I hasten to add that the hon. Member for Bexhill and Battle should not be seen as encouraging overtrading by companies. It is wise to be prudent in such respects. The question is again only one of cash flow impact. If a company were in so much trouble that it had to borrow from the Inland Revenue at 2 per cent. over base—


I would not wish it on any company—it would not get a bad deal at that rate. It is worth pointing out that we have reduced the differential between the borrowing and lending rate of the Inland Revenue and companies from the 5 per cent. that prevailed under the Conservative Government for 18 years and was never touched, to a much more reasonable 2 per cent. At that rate, there is not a great deal for the Opposition to grumble about.
The general mix that we have come up with reflects what we thought was the best judgment of the situation. I do not think that anyone in the House—at least, no hon. Member has declared himself in such a light so far—rejects the principle of what we have done. The Opposition are trying to accept it in principle, but, having willed the end, they will not will the means. That is why the amendment is confusing.
We cannot make regulations under clause 30 without first laying them before the House of Commons. The regulations published on Friday are already in the Library and available to hon. Members. They have to be laid before the House so that we can scrutinise them before they come into effect. Not surprisingly, we do not need the amendment to require that.
The second reason anybody who looks at the amendment is bound to be very puzzled is that it will require instalment regulations to be made under the affirmative resolution procedure. That is the point that the right hon. Member for Hitchin and Harpenden is trying to make in tabling the amendment. Indeed, he went on to say, when challenged, that he could not remember in his experience in the Treasury—I think that he served successively as Financial Secretary and Economic Secretary—the Conservative Government doing anything of the kind that we are proposing. Perish the thought.
In the light of that damascene conversion, why, if the Conservatives did not like regulations being made under the negative resolution procedure, did they not change it during the 18 years that they were in office? I shall tell the right hon. Member for Hitchin and Harpenden what the Conservatives did in those years and give a few figures to substantiate my comments.
The Conservatives were responsible for hundreds of sets of tax regulations that were introduced under the negative resolution procedure, including nearly 200 on direct taxes over the three years to March 1997. The right hon. Member for Hitchin and Harpenden said that the Conservative Government never did any such thing. Perhaps he did not know what they were doing. Perhaps he did not know what he was doing when he was in the Treasury. Above all, perhaps he did not know what the right hon. and learned Member for Rushcliffe (Mr. Clarke) was doing when he was Chancellor. I am sure that the right hon. and learned Gentleman very often did not know about such detail.
In 1993, the Conservatives quite happily made new regulations covering the deduction from the pay-as-you-earn scheme—tax from employees' wages and salaries—under the negative resolution procedure. What does the right hon. Member for Hitchin and Harpenden have to say about that? Those regulations affected tens of millions of people and tens of billions of pounds of tax. The simple fact is that the right hon. Gentleman did not know what he was talking about then,

did not know what the right hon. and learned Member for Rushcliffe was doing, and neither of them knew what the Government were doing.
The amendment is inappropriate and unnecessary and I of course urge the Committee to reject it.

Mr. Lilley: I shall endeavour to be brief so that we can move on to the other two amendments to clause 30.
The hon. Member for Gordon (Mr. Bruce) said that there had been relatively little detailed criticism of the clause. The reason is, of course, that there is rarely detailed criticism until regulations and details are published. They were not published until Friday, they are not yet in the Vote Office or available to hon. Members, and they have not been seen by the outside world ahead of this debate. Consequently, there was no possibility of people making informed submissions that could be considered by Conservative Members or, if they were remotely interested, by Labour Members. That is what is so wrong with the procedures and mechanisms that the Government are pursuing in this matter.
There has been quite a lot of opposition to the fact that the Government are proceeding with the use of regulations on an unprecedented scale. Regulations have always had a place, but when everything is delegated to regulations and none of the detail is in the Bill or published in time for consideration in Committee, that is wrong. My hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb), in a powerful speech that will pay the Paymaster General dividends if he reads it, quoted a series of accountants to the effect that what is proposed is perilously close to a constitutional abuse—and so it is.
My hon. Friend the Member for Grantham and Stamford (Mr. Davies) made a characteristically compelling speech in which he asked the Government why they had not simply drafted a one-clause Bill stipulating that the Treasury should have the power to introduce any tax by whatever measures it thought appropriate in the appropriate regulations. I fear that he is putting ideas into their heads. I saw many of them perk up at the thought.
The process moves from paying tax in arrears to paying it in advance. Inevitably, that involves a period of double taxation. After beginning blusteringly by saying that he would be transparent and open, the Paymaster General dodged answering the question of how much extra tax will be raised by the clause. We are used to his dodging his taxes; now he is dodging telling us how much other people will have to pay in taxes as a result of his measures. That is not satisfactory. We will come back to this time and again. He pretends that industry is happy with the proposals. The CBI welcomed the mitigation of his original, more onerous proposals—

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): Order. The right hon. Gentleman has just mentioned tax dodging. I am not sure that that is the right phraseology to use, and I would be grateful if he withdrew it.

Mr. Lilley: Of course I withdraw. The Paymaster General is well known for dodging answering questions about either his own taxes or the taxes that he is imposing on others. That is a well-established fact.


We believe that the Government should come clean on the amount of tax involved and recognise that industry does not welcome the extra tax that it is having to pay. What they propose will be welcomed even less when it accumulates with the other burdens they are imposing on business, which threaten a manufacturing recession that is likely to spread in due course to the whole economy.

Amendment negatived.

Mr. Lilley: I beg to move amendment No. 3, in page 16, line 29, at end insert—
'(c) for special payment arrangements for companies making seasonal profits, enabling such companies to pay instalments based on actual tax-adjusted results for the previous six month period.'.
The quarterly process will inevitably increase taxes on business by requiring companies to forecast their future profits and pay taxes on them before they have been earned. If companies underestimate, they will have to pay interest on the underpayment at a rate designed to discourage understatement. That is a particularly tough requirement on the many firms with highly seasonal business; retailers, for example, who depend on the Christmas season to make any profit at all will have to pay taxes on quarters three and four before they have earned anything at all. The amendment would allow such companies to pay less in the first half of the year.
International experience shows that corporation tax systems can be reformed to help seasonal businesses. In the United States, for example, businesses pay tax by quarterly instalments, but the system is modified to allow seasonal traders to pay each instalment of tax according to the proportion of annual profits earned at each payment date, using previous years' estimates. Seasonal businesses are not looking for any preferential treatment, but for a corporation tax system that acknowledges their distinctive trading patterns.
It must be wrong to force seasonal businesses to pay tax in advance of earning enough revenues to have any profit at all over the year as a whole. Retailers have come to me with detailed suggestions about how to resolve the problem. The Paymaster General should listen to them and act on what they have to say.
To be eligible to use the method we propose, retailers suggest that a company's profits earned in the first six months of the accounting period must be consistently less than their profits earned for the complete financial year. In the US, the proportion is set at 30 per cent. or less of total profit for the year. It would be easy to determine the estimates by looking at established trading patterns over the previous five years, as disclosed in published interim reports. I hope that the Paymaster General will seriously consider the amendment, which should not be costly for the Treasury to accept and introduce and would meet a valid concern of which he should take due note.

Mr. Malcolm Bruce: I support the amendment. Some companies—in agriculture, farming and fruit, for example—have business that is exclusively summer or Christmas related, and it is reasonable to suggest that the Bill should take some account of that. Otherwise, the cash flow benefit to the Treasury may be significant, but the difficulties for individual companies may be real. If the Conservative party intends to divide the Committee on the amendment, we will support it.

Mr. Dafydd Wigley: I, too, support the amendment. I represent a constituency where there is a considerable seasonal distortion to economic activity. Tourism is one of the major industries in my area; agriculture—when it is not going through a depression, as it is now—is the other.
The fact that major companies in the tourism sector have large amounts of money coming in over a limited period and then have low levels of activity the rest of the year leads to knock-on effects on a host of service industries associated with the demand from the tourism sector. In Llandudno, for example, the population goes up from 20,000 to 200,000 in the summer. That gives an indication of the impact of seasonal business on the business fraternity in the area. The amendment would be helpful in terms of cash flow for such companies, and I hope that the Government will seriously consider it.

Mr. Geoffrey Robinson: The Committee is rightly considering the amendment in a reasoned tone. Like the right hon. Members for Hitchin and Harpenden (Mr. Lilley) and for Caernarfon (Mr. Wigley), the Government have received representations on it. We met the British Retail Consortium, which suggested something similar to the amendment; it would confine the measure to companies consistently making less than 30 per cent. of their profits in the first half of the year.
The amendment might help a few large companies, but there cannot be too many firms that make upwards of 70 per cent. of their profits in the second half of the year. The Committee will realise that the amendment would add considerable complexity to the rules. The right hon. Member for Hitchin and Harpenden refers to the American situation, but I am sure that he is aware that, in other respects, the American system is less favourable. The whole of the tax, as opposed to half, is paid in the year in question. I do not think that the British Retail Consortium, or anybody else, would want that because it would be so disadvantageous. We would not have received the support that we have received for the changes over a four-year transitional period if we were to move to the American system as a whole.
It is unwise to cherry pick—to have one bit from America and another bit from France—as we would end up with a mish-mash that would not achieve the principled reform we are looking for. I am not inclined to accept the amendment or the proposal from the British Retail Consortium, but we will consider the matter carefully and return to it.

Mr. Lilley: I am grateful to the Paymaster General for that assurance; we will not press the amendment to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Lilley: I beg to move amendment No. 4, in page 16, leave out lines 37 and 38.
We have drawn attention to the fact that clause 30 in particular—like the Bill in general—makes excessive use


of regulation-making powers. I invite the House to consider particularly the proposed new section 59E(5), which states:
Regulations under this section—

(a) may make such modifications of any provisions of the Taxes Acts, or
(b) may apply such provisions of the Taxes Acts,

as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.
It is, in short, a Henry VIII clause—a clause that enables the Government, by regulation, to change primary law elsewhere without proper consideration by the House.
We know that the other place has found such legislative provisions particularly abhorrent, but it will not have the chance to vote on the Finance Bill. We should eliminate that subsection and ensure that if the Government want to change primary legislation, they must bring the change to the House in an open and democratic fashion by the normal procedures of the House and may not publish regulations that cannot be amended or debated.

Mr. Geoffrey Robinson: This is, quite simply, a wrecking amendment, and the right hon. Gentleman is again suffering from a fairly severe bout of amnesia. It is quite normal for tax regulation-making powers to permit modifications of this sort. Given the authors of the amendment—people who have served in distinguished positions in the Treasury—the House may be interested to learn that the previous Government's last three Finance Bills provided more than a dozen sets of regulation-making powers covering direct taxes alone, three quarters of which included the power to modify existing provisions of the Taxes Acts.
The only practical effect of the amendment would be to prevent regulations from being made to introduce quarterly instalment payments of corporation tax by large companies. If that is the Opposition's intention—clearly it is—I recommend that we proceed to a vote on the clause as a whole.

Mr. Lilley: The Paymaster General said that the Conservative Government's last three Finance Bills contained 12 sets of regulation-making powers, but this clause alone has 11 and includes the obnoxious subsection that the amendment would delete. On any basis, that should make the Committee wary of allowing the clause to stand part of the Bill—we shall recommend that it votes against doing so.

Amendment negatived.

Question put, That the clause stand part of the Bill:—

Committee divided:Ayes 275, Noes 121.

Division No. 255]
[6.49 pm


AYES


Abbott, Ms Diane
Atkins, Charlotte


Adams, Mrs Irene (Paisley N)
Ballard, Mrs Jackie


Ainsworth, Robert (Cov'try NE)
Banks, Tony


Alexander, Douglas
Bayley, Hugh


Allan, Richard
Begg, Miss Anne


Allen, Graham
Bell, Martin (Tatton)


Anderson, Janet (Rossendale)
Bell, Stuart (Middlesbrough)


Armstrong, Ms Hilary
Benn, Rt Hon Tony


Ashton, Joe
Bennett, Andrew F





Benton, Joe
Galloway, George


Best, Harold
Gardiner, Barry


Betts, Clive
George, Bruce (Walsall S)


Blackman, Liz
Gerrard, Neil


Blizzard, Bob
Gibson, Dr lan


Borrow, David
Godman, Dr Norman A


Bradley, Peter (The Wrekin)
Godsiff, Roger


Bradshaw, Ben
 Golding, Mrs Llin


Breed, Colin
Gorrie, Donald


Brinton, Mrs Helen
Griffiths, Jane (Reading E)


Brown, Rt Hon Nick (Newcastle E)
Griffiths, Nigel (Edinburgh S)


Brown, Russell (Dumfries)
Hall, Mike (Weaver Vale)


Bruce, Malcolm (Gordon)
Hall, Patrick (Bedford)


Burden, Richard
Hanson, David


Burgon, Colin
Harris, Dr Evan


Butler, Mrs Christine
Heal, Mrs Sylvia


Byers, Stephen
Heath, David (Somerton & Frome)


Campbell, Mrs Anne (C'bridge)
 Henderson, Ivan (Harwich)


Campbell, Ronnie (Blyth V)
Hepburn, Stephen


Campbell-Savours, Dale
Heppell, John


Canavan, Dennis
Home Robertson, John


Cann, Jamie
Hoon, Geoffrey


Caplin, Ivor
Hope, Phil


Casale, Roger
Hopkins, Kelvin


Caton, Martin
Howarth, George (Knowsley N)


Chapman, Ben (Wirral S)
 Howells, Dr Kim


Chidgey, David
Hoyle, Lindsay


Chisholm, Malcolm
Humble, Mrs Joan


Clark, Dr Lynda
Hurst, Alan


(Edinburgh Pentlands)
Hutton, John


Clark, Paul (Gillingham)
Iddon, Dr Brian


Clarke, Charles (Norwich S)
Jackson, Helen (Hillsborough)


Clarke, Eric (Midlothian)
Jamieson, David


Clelland, David
Jenkins, Brian


Clwyd, Ann
Johnson, Alan (Hull W & Hessle)


Cohen, Harry
Johnson, Miss Melanie


Coleman, lain
(Welwyn Hatfield)


Connarty, Michael
Jones, Barry (Alyn & Deeside)


Cook, Frank (Stockton N)
Jones, leuan Wyn (Ynys Môn)


Corbyn, Jeremy
Jones, Ms Jenny


Cotter, Brian
(Wolverh'ton SW)


Cousins, Jim
Jones, Jon Owen (Cardiff C)


Cranston, Ross
 Jones, Martyn (Clwyd S)


Crausby, David
Jowell, Ms Tessa


Cryer, Mrs Ann (Keighley)
Kaufman, Rt Hon Gerald


Cummings, John
Keeble, Ms Sally


Cunliffe, Lawrence
Keen, Ann (Brentford & lsleworth)


Cunningham, Jim (Cov'try S)
Kennedy, Jane (Wavertree)


Dalyell, Tam
Kidney, David


Darling, Rt Hon Alistair
Kilfoyle, Peter


Davidson, Ian
King, Andy (Rugby & Kenilworth)


Davies, Rt Hon Denzil (Llanelli)
Kingham, Ms Tess


Davies, Geraint (Croydon C)
Kirkwood, Archy


Davis, Terry (B'ham Hodge H)
Ladyman, Dr Stephen


Dean, Mrs Janet
Lawrence, Ms Jackie


Denham, John
Laxton, Bob


Dewar, Rt Hon Donald
Lepper, David


Dobbin, Jim
Leslie, Christopher


Drew, David
Levitt, Tom


Drown, Ms Julia
Livingstone, Ken


Eagle, Angela (Wallasey)
Llwyd, Elfyn


Eagle, Maria (L'pool Garston)
Lock, David


Edwards, Huw
Love, Andrew


Ellman, Mrs Louise
McAllion, John


Ennis, Jeff
McAvoy, Thomas


Etherington, Bill
McCabe, Steve


Fatchett, Derek
McCafferty, Ms Chris


Feam, Ronnie
McCartney, lan (Makerfield)


Fisher, Mark
McDonnell, John


Fitzpatrick, Jim
McGuire, Mrs Anne


Flynn, Paul
Mclsaac, Shona


Foster, Rt Hon Derek
McKenna, Mrs Rosemary


Foster, Michael Jabez (Hastings)
Mackinlay, Andrew


Foster, Michael J (Worcester)
McNamara, Kevin


Foulkes, George
McNulty, Tony


Fyfe, Maria
McWilliam, John






Mallaber, Judy
Savidge, Malcolm


Mandelson, Peter
Sawford, Phil


Marsden, Gordon (Blackpool S)
Sedgemore, Brian


Marshall, David (Shettleston)
Sheerman, Barry


Marshall—Andrews, Robert
Sheldon, Rt Hon Robert


Maxton, John
Simpson, Alan (Nottingham S)


Meacher, Rt Hon Michael
Skinner, Dennis


Michael, Alun
Smith, Rt Hon Andrew (Oxford E)


Michie, Bill (Shef'ld Heeley)
Smith, Angela (Basildon)


Michie, Mrs Ray (Argyll & Bute)
Smith, Miss Geraldine


Mitchell, Austin
(Morecambe & Lunesdale)


Moffatt, Laura
 Smith, John (Glamorgan)


Moonie, Dr Lewis
Smith, Sir Robert (W Ab'd'ns)


Moran, Ms Margaret
Southworth, Ms Helen


Morgan, Ms Julie (Cardiff N)
Spellar, John


Morris, Ms Estelle (B'ham Yardley)
Starkey, Dr Phyllis


Morris, Rt Hon John (Aberavon)
Steinberg, Gerry


Mudie, George
Stevenson, George


Murphy, Denis (Wansbeck)
 Stewart, David (Inverness E)


Murphy, Jim (Eastwood)
Stewart, lan (Eccles)


Murphy, Paul (Torfaen)
Stinchcombe, Paul


O'Brien, Mike (N Warks)
Stott, Roger


Olner, Bill
Strang, Rt Hon Dr Gavin


O'Neill, Martin
Straw, Rt Hon Jack


Organ, Mrs Diana
 Stringer, Graham


Osborne, Ms Sandra
Stuart, Ms Gisela


Palmer, Dr Nick
Stunell, Andrew


Pearson, lan
Swinney, John


Perham, Ms Linda
Taylor, Rt Hon Mrs Ann


Pickthall, Colin
(Dewsbury)


Pike, Peter L
Taylor, Ms Dari (Stockton S)


Plaskitt, James
Taylor, Matthew (Truro)


Pond, Chris
Temple—Morris, Peter


Pope, Greg
Thomas, Gareth (Clwyd W)


Pound, Stephen
Thomas, Gareth R (Harrow W)


Powell, Sir Raymond
Timms, Stephen


Prentice, Ms Bridget (Lewisham E)
Tipping, Paddy


Prentice, Gordon (Pendle)
Trickett, Jon


Primarolo, Dawn
Truswell, Paul


Prosser, Gwyn
Turner, Dennis (Wolverh'ton SE)


Purchase, Ken
Turner, Dr George (NW Norfolk)


Quinn, Lawrie
Twigg, Derek (Halton)


Radice, Giles
Tyler, Paul


Rammell, Bill
Walley, Ms Joan


Rapson, Syd
Welsh, Andrew


Raynsford, Nick
White, Brian


Reed, Andrew (Loughborough)
Wigley, Rt Hon Dafydd


Rendel, David 
Williams, Rt Hon Alan (Swansea W)


Robertson, Rt Hon George (Hamilton S)




Williams, Alan W (E Carmarthen)


Robinson, Geoffrey (Cov'try NW)
Williams, Mrs Betty (Conwy)


Roche, Mrs Barbara
Willis, Phil


Rooker, Jeff
Wise, Audrey


Ross, Ernie (Dundee W)
Wood, Mike


Roy, Frank
Wright, Anthony D (Gt Yarmouth)


Ruane, Chris
Tellers for the Ayes:


Russell, Bob (Colchester)
Mr. John McFall and


Sanders, Adrian
Mr. Jim Dowd.


NOES


Ainsworth, Peter (E Surrey)
Cash, William


Arbuthnot, James
Chapman, Sir Sydney (Chipping Barnet)


Atkinson, David (Bour'mth E)



Atkinson, Peter (Hexham)
 Chope, Christopher


Baldry, Tony
Clappison, James


Bercow, John
Clark, Rt Hon Alan (Kensington)


Beresford, Sir Paul
 Clarke, Rt Hon Kenneth (Rushcliffe)


Boswell, Tim



Bottomley, Peter (Worthing W)
Clifton—Brown, Geoffrey


Bottomley, Rt Hon Mrs Virginia
Collins, Tim


Brazier, Julian
 Colvin, Michael


Browning, Mrs Angela
Cormack, Sir Patrick


Bruce, lan (S Dorset)
 Cran, James


Burns, Simon
 Rt Hon David





Davies, Quentin (Grantham)
Major, Rt Hon John


Davis, Rt Hon David (Haltemprice)
Malins, Humfrey


Day, Stephen
Maples, John


Dorrell, Rt Hon Stephen
Maude, Rt Hon Francis


Duncan, Alan
Mawhinney, Rt Hon Sir Brian


Emery, Rt Hon Sir Peter
May, Mrs Theresa


Evans, Nigel
Moss, Malcolm


Faber, David
Nicholls, Patrick


Fabricant, Michael
Ottaway, Richard


Fallon, Michael
Page, Richard


Forth, Rt Hon Eric
Paice, James


Fowler, Rt Hon Sir Norman
Paterson, Owen


 Fraser, Christopher
Pickles, Eric


Gale, Roger
Prior, David


Garnier, Edward
Randall, John


Gibb, Nick
Redwood, Rt Hon John


Gorman, Mrs Teresa
Robathan, Andrew


Gray, James
Robertson, Laurence (Tewkb'ry)


Green, Damian
St Aubyn, Nick


Greenway, John
Sayeed, Jonathan


Grieve, Dominic
Shephard, Rt Hon Mrs Gillian


Hague, Rt Hon William
Shepherd, Richard


Hammond, Philip
Simpson, Keith (Mid—Norfolk)


Heald, Oliver
Soames, Nicholas


Heathcoat-Amory, Rt Hon David
Spelman, Mrs Caroline


Horam, John
Spicer, Sir Michael


Howard, Rt Hon Michael
Spring, Richard


Jack, Rt Hon Michael
Steen, Anthony


Jackson, Robert (Wantage)
Streeter, Gary


Johnson Smith,
Swayne, Desmond


Rt Hon Sir Geoffrey
Syms, Robert


Key, Robert
Tapsell, Sir peter


King, Rt Hon Tom (Bridgwater)
Taylor,lan (Esher &Walton)


Kirkbride, Miss Julie
Taylor, John M (Solihull)


Laing, Mrs Eleanor
Taylor, Sir Teddy


Lait, Mrs Jacqui
Towned, John


Lansley, Andrew
Tredinnick, David


Leigh, Edward
Viggers, Peter


Letwin, Oliver
Wardle, Charles


Lidington, David
Widdecombe, Rt Hon Miss Ann


Lilley, Rt Hon Peter
Wilshire, David


Lloyd, Rt Hon Sir Peter (Fareham)
Winterton, Mrs Ann  (Congleton)


Loughton, Tim
Winterton, Nicholas (Macclesfield)


Lyell, Rt Hon Sir Nicholas
WoodWard, Shaun


MacGregor, Rt Hon John
Yeo, Tim


McIntosh, Miss Anne
Young, RT Hon Sir George


MacKay, Andrew



Maclean, Rt Hon David
Tellers for the Noes:


McLoughlin, Patrick
Mr. John Whittingdale and


Madel, Sir David
Mr. Nigel Waterson.

Question accordingly agreed to.

Clause 30 ordered to stand part of the Bill.

Mr. Gibb: On a point of order, Mr. Lord. During the debate on amendment No. 2, the hon. Member for Dudley, North (Mr. Cranston) referred to some statutory instruments relating to clause 30 that he said the Government had already published and placed in the Library, and I believe that that was confirmed by the Paymaster General. I asked Library staff for the reference number of the draft regulations; they can trace no sign of any such regulations being published on Friday, and there is no mention of them in the list of draft regulations or on today's Order Paper. Is not it a gross discourtesy to the Committee that the regulations were not published before the debate, and is not something odd going on, when Labour Back Benchers can see them before other hon. Members?

The Second Deputy Chairman: I was not in the Chair when those exchanges took place, but I have no doubt


that Ministers will have heard the point of order. If the documents ought to be in the Library and are not, I assume that Ministers will take the appropriate action.

Mr. Geoffrey Robinson: Further to that point of order, Mr. Lord. I hope that the hon. Gentleman asked for the right things when he went to the Library.

Mr. Gibb: Yes.

Mr. Robinson: If that is the case, we are at a loss at the moment, but we will seek to rectify any error as quickly as possible.

Clause 75

USE OF PEPS POWERS TO PROVIDE FOR ACCOUNTS

Mr. Lilley: I beg to move amendment No. 5, in page 60, line 30, leave out 'subsection' and insert 'subsections'.

The Second Deputy Chairman: With this, it will be convenient to discuss the following amendments: No. 7, in page 60, line 36, at end insert—
'(IB) The regulations to be made under this section shall provide that investors over the age of 55 shall not be restricted, within the overall annual contribution limits, in the amount that they may choose to invest in the form of—

(a) cash, or
(b) life insurance.'.

No. 8, in page 60, line 36, at end insert—
'(IC) The regulations to be made under this section shall provide that the charges made for administering an account such as is described in subsection (1A) above shall be no greater than the average charge made for administering a PEP in financial year 1998–99, such average to be calculated by the Treasury.'.

Mr. Lilley: The original plans for individual savings accounts were not only badly thought out but wrong in principle. The original proposals revealed Labour's true intentions on private savings. Labour wanted to tax prudent savers, in effect retrospectively: those who had saved most prudently would face higher tax.
We forced a U-turn on the issue. In a debate some weeks before the Budget, we won the argument, even though we could not win the vote, and the dismay on the faces of Labour Back Benchers was clear when Ministers were unable to put up any coherent defence of the proposals. We welcome the U-turn, humiliating though it may be for the Government.
Unfortunately, the damage has in part been done, because, by publishing their intention to introduce retrospective changes in the taxation of savings vehicles already in existence and savings already accumulated, the Government have made people concerned that, at some future date, a Labour Government might behave in a similar fashion, when they think that they can get away with it. That has increased reluctance to save in the relevant forms. That is doubtless part of the reason for the decline in the savings ratio that is forecast in the Red Book.

Labour originally wanted to reduce the annual amount that people could save in tax-advantaged forms. Alas, that aspect remains in the revised proposals announced in the Budget and in the Bill. The maximum of £10,800 a year of tax-exempt savings will be reduced to only £5,000 a year.
That is especially onerous on those approaching retirement. If they have not made sufficient provision earlier in their life, they will not get the benefits of compound interest that enable people to save lesser sums. Having fewer years to go, they may need to put more money aside. We should prefer a higher amount to be permitted to savers in, say, the last 10 years of their working life.
Thinking that the Government were unlikely to respond to such a sensible measure, which breaks the very principle to which they are wedded, we have made, in amendment No. 7, a suggestion that came originally from Saga, which caters specifically for the over-50s and over-55s, to allow people in that age group greater flexibility on how they deploy their investments, within the —5,000 limit, so that they can do so in less risky ways if they feel that to be appropriate as they approach retirement and have less chance to ride out the ups and downs of the stock market over a longer period.
The Government also wanted to cut the incentives. The cut in the July Budget remains, alas, in the current proposals. Under our Conservative tax system for people saving in personal equity plans, for every £80 net dividend, people got a £20 tax credit, whether they were non-taxpayers or basic rate taxpayers. Under the Government's scheme, the non-taxpayers£those with the lowest incomes£will get no tax credit at all. That will penalise the least well-off relative to the tax regime that we used to have. I will be interested to see whether any Government Members stand up and defend that.
Instead of getting £20 tax credit for every £80 of net dividend, basic rate taxpayers will get only £8.90, and that credit will disappear entirely after five years. The main beneficiaries from investing in equities in individual savings accounts will be top rate taxpayers. Is that what the Labour party envisaged when it was elected? Did it expect Ministers to introduce a scheme in which the primary benefits fall to top rate taxpayers and which limits any tax benefit to those on the lowest incomes and more than halves the benefit to basic rate taxpayers? Unfortunately, the costs of the scheme will absorb most of the tax benefit for basic rate taxpayers. The fourth characteristic of the Government's proposals was that they were reckless about the costs of schemes. The £50,000 lifetime limit would have had the most adverse consequence on providers of savings vehicles, and we are delighted that, at least on the face of it, that has disappeared.
Other complex rules persist and the sheer change in the rules from the previous system will require all suppliers to modify their systems£and incur costs in so doing. That will enhance costs and mean that a basic rate taxpayer with a modest tax credit will find much of the credit is absorbed by the extra costs imposed by that unnecessary change, unless the provider absorbs the costs; unit and investment trust providers sometimes do so.
Our amendments would deal with some of those problems, but, alas, many of the problems inherent in the changes that the Government announced in November or


early December persist in the proposals in the Bill. We can only hope that the Government will be willing to make further changes in addition to the massive changes that they have already been forced to make in response to our arguments and widespread criticisms from the financial and savings community.

Mr. Gibb: Despite all the changes that the Government have made in ending the absurdity of a lifetime limit, perhaps the Paymaster General could tell us the advantages for a basic rate taxpayer of holding equities through an individual savings account, given that any capital gains are likely to absorb his capital gains annual allowance anyway and it is unlikely that such a taxpayer would be able to generate in a normal, average year gains exceeding the annual limit. The 10 per cent. tax credit over five years is unlikely to exceed any charges made by a managed fund scheme, so what are the advantages of a basic rate taxpayer holding equities through an ISA?
If there are no advantages, how can the Government claim that introducing the ISA is any great advance on the TESSA and PEPs regime that already existed? Many outside commentators, including Gavyn Davies, I think£I will stand corrected if I am wrong£have said that all the Government's objectives could have been achieved by simple changes to TESSAs, for example, by removing the ending of the five-year, locked-in period.
The Institute of Directors said of the regime:
We remain concerned about the low level of the annual limit (£5,000 compared with the £7,800 a year which can now be put into a general PEP plus a TESSA). We are also concerned about the £1,000 sub-limits for cash and insurance products which will increase administrative costs and may also tempt people saving, say, £2,000 a year into inappropriate equity investments.
Will the £5,000 limit be increased to reflect inflation as years go by, or will it stay at £5,000 and thus diminish over time as inflation eats away the value of that figure? Will the Minister confirm which of those two options the Government will pursue?
The main criticism by the Institute of Directors again concerns how the legislation has been put before the House. It said:
None of this detail is in the Finance Bill itself. We are concerned that matters which should be dealt with in primary legislation, allowing Parliament to make detailed amendments, are being relegated to secondary legislation. If, for example, Parliament were to decide that the limits mentioned above should be changed, it could only achieve this by the very crude method of indicating to Ministers that the regulations for ISAs would be rejected if they did not contain different limits.
Perhaps the Paymaster General will respond to those points.

Ms Sally Keeble: I am grateful to have a chance to speak in this debate because the amendments are mean minded and petty, and their aim is to undermine the purpose of introducing the ISA in the first place. In view of the time, I will be brief.
On amendment No. 7, the main aim of the ISA is—and always was£to encourage people who do not already have savings to save. The scheme and the way in which it was to be made available were constructed particularly with that group in mind. At present, young people, especially people with children, have the fewest savings. The family resources survey showed that a third of

pensioner couples had £20,000 or more in savings, and one in five of all couples without children had savings at that level. Those are the people who have the most money in savings and who might not look to the ISA to encourage them to start saving. In comparison, a third of all couples of working age with children and 70 per cent. of single parents with children had no savings at all.
An amendment that would change the regulations to encourage people of over 55 to save and to provide a savings regime that is more suitable for them runs against the entire purpose of the ISA.

Mr. Tim Loughton: The hon. Lady is referring to those 6 million elusive investors who are to be attracted into ISAs. Which feature of the ISA will attract those virgin investors with no savings into becoming savers?

Ms Keeble: I am grateful to the hon. Gentleman for making that point. People may not save with the mainstream financial institutions, but that does not mean that they have no savings at all. They might well have savings in credit unions or the myriad other informal savings schemes. It is extremely important that those people are attracted into the mainstream so that they can get access to a wider range of financial services. If they have savings accounts, they might also be able to get access to loan accounts.
I take the hon. Gentleman's point about which elements of the ISA are the most attractive. I suspect that they will be the points of access, which is why the supermarkets are so important, and the fact that complex services will be offered, but with ease of access so that people can take their money out as well, which will encourage them to start putting money into savings.

Mr. Loughton: I think that the hon. Lady is actually saying something different. If she is alluding to current savings in non-mainstream schemes, such as credit unions or small bank accounts, and saying that those savings could be transferred into the new ISA regime, that will not add a single penny in additional savings. The existing bank arrangements with supermarkets are perfectly accessible and are available to any shopper. Why will ISAs be more attractive and induce people to save more?

Ms Keeble: I am not merely thinking of small banks. Credit unions are one such scheme, certainly, but there are many other informal schemes such as Christmas clubs and so forth, in which people save small amounts of money over a short period. Those provide savings schemes for the people who have the least money of all. I do not know the extent of such schemes, but I am certainly thinking of those people. The hon. Gentleman is right in that we do not merely want people to shift their savings from one scheme to another. I have dealt with the aspects of the scheme that will probably be most attractive to people who do not save in mainstream savings accounts.
The Government need to stimulate savings most among people of working age who have children still living at home. Amendment No. 7 would not primarily help such people. In addition, it would give tax incentives to people who are already relatively wealthy for their cash savings, which would not be a prudent use of tax incentives.


It would, in some ways be silly to produce a new PEP with cash by the back door. The over-55s are already the most likely to own a PEP; the British Household Panel survey found that 31 per cent. of the richest over-55s and 43 per cent. of the richest over-60s have at least one PEP. A PEP with cash by the back door would not achieve the purpose for which the Government produced the scheme.
On Tory amendment No. 8, it is of course desirable that administration costs are as low as possible. The Labour party has—quite rightly—criticised the high administration costs of, for example, private pensions. The Government plan to introduce benchmarking of costs for the individual savings accounts. That, combined with careful monitoring, is the right way to control administration costs and ensure that people with relatively low incomes get good value for money in their savings.

Mr. Philip Hammond: rose—

Mr. Loughton: rose—

Ms Keeble: I have an embarrassment of choice.

Mr. Hammond: Does the hon. Lady think that costs can be equated with value for money?

Ms Keeble: People who do not have much money clearly need savings that provide as much return as possible and are best served by keeping administration costs low. The question is how to do it. I shall deal later with why the proposals in your amendment are not right.

The Second Deputy Chairman: Order. The hon. Lady must be aware that I have not put anything in any amendment.

Ms Keeble: I apologise, Mr. Lord. I mean that I will deal later with the amendments tabled by the hon. Gentleman's party, which I do not believe are the right way to control costs.
The Government's proposals rightly provide flexibility and the means to ensure that mainstream financial institutions will control administrative costs and pass on as much as possible of the benefits to people on low incomes.

Mr. Loughton: I am grateful to the hon. Lady for taking a multi-volley of interventions.
The hon. Lady has raised benchmarking. Is she saying that cost of a product is the only aspect of benchmarking essential to ISAs? Can she distinguish between benchmarking and kite marking? Labour Members have used both terms—but have inter-used and wholly confused them.

Ms Keeble: At the risk of further confusion, I shall give my understanding, which is that kite marking involves approval for particular ways of doing things whereas benchmarking is about criteria for an aspect of a scheme. Certain percentages might be set for

administration costs, for example. That differs from kite marking, which says that this, that or the other is an approved scheme.
Administration costs must be examined and are likely to be a difficult area of the scheme. Accounts in which people make frequent, small deposits and can withdraw money fairly easily have high servicing costs. That is why the Government must set a benchmark in this area and provide a real incentive to financial institutions to provide such schemes. The institutions will not think up such schemes on their own. Some institutions are not providing particularly good services at present.
Artificially capping administration costs would probably make it extremely difficult to deliver such accounts, at least in a way that makes them attractive to people who have not previously saved in mainstream savings accounts. Some of the factors likely to make ISAs attractive to people on low incomes—such as frequent withdrawal and ability to make small deposits—will make them difficult to service.
The amendment would undermine the success of the scheme. I believe that that is what the Opposition want. Having failed to win the argument in open debate, they are trying to scupper the individual savings accounts by their mean-minded measures, which would do nothing to provide tax breaks to people with less money and would do everything to protect the incomes of the top 10 per cent. of income earners aged over 50. That is another way of saying that the Tory party is simply trying to look after its own, not the wider interests of the country and the public. I urge the Committee to reject the amendments.

Mr. Loughton: First, I must declare an interest, which is in the Register of Members' Interests. I worked for a company that administered PEPs and have run PEPs for 10 years, since their inception.
The amendments tackle problems in the Bill for older people. Like my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), I welcome the climbdown on PEPs. We wish ISAs well and we need them to work, but they must be the right product in the right formulation. We also welcome the tacit admission—at last—that the Government will have to forgo tax relief in order to encourage savings. The net effect of the new proposals will mean forgoing much more tax relief to the Treasury than ever happened under PEPs, as the Paymaster General has had to admit in various answers to written questions.
It is a shame that the ISA proposals contain a major missed opportunity to encourage the elusive 6 million people to save for the long term by not linking a savings scheme with the benefit system and stakeholder pensions. Time and again, we are faced with these 6 million people. We do not know who they are or where they come from. If they are shyly revealing themselves, where are they hiding?
It is a complete fantasy to say that 6 million people are queuing to throw money at the doors of the Treasury. Six million lower-earning people are not remotely attracted by a capital gains tax concession, as they would get nowhere near the current —6,800 limit. They are not attracted by a tax credit that, on an average yield on a —5,000 equity investment, would amount to just —14, which would be more than gobbled up in charges.
As the hon. Member for Northampton, North (Ms Keeble) admitted, the only real attraction of the scheme will be to the Christmas club-type cash element.


What will really happen is that people who have existing small amounts of money in various pots may shift it to more convenient pots within an ISA. That will not add a single penny to savings, which surely is not the Government's underlying intention. Far from the scheme being a temptation for 6 million new investors, it would be easier for the Paymaster General to feed the 5,000.
The Bill completely misses the need to look after people with existing PEPs. Although PEPs will be allowed to continue, flaws remain that would have had to be changed even if PEPs had remained without an alternative. For example, why should PEP holders be unable to have the full range of overseas investment that new ISA investors may have?
Holders of single-company PEPs from their inception should not have to have six completely ring-circled deposit accounts for different years. If they have had one particularly good PEP—perhaps worth £20,000 or £30,000 now—they must reinvest it in only one stock, which puts a disproportionate exposure on a single equity or fund.

Ms Keeble: Does the hon. Gentleman accept that even reasonably wealthy people who save tend to invest money for a shorter time than they can afford—for five years rather than 10? The real challenge is not to get non-savers to save for one, two or three years but to save at all. Having got them used to that, with the confidence that they can get access to their money in a crisis, the aim is then to get them to save for longer periods. Does he accept that people with money do not always put it into great long-term investments, because they want access to it?

Mr. Loughton: I agree with the hon. Lady's aims, but, with the greater flexibility of ISAs and enabling people to take out cash and, in a confused way, refund it later—whether it is capital or accumulated income that is taken out and replaced is not clear—the Government are not encouraging longer-term investment. That is a fallacy. There was an inflexibility with PEPs, but one advantage of that was that people were committed to longer-term saving.
The real problem is that time is ticking away, especially for older investors, as my right hon. Friend the Member for Hitchin and Harpenden said. The ISA regulations are not even out yet and are not due before 10 May, but ISAs will start in 11 months. City firms and independent financial advisers will have to set up systems ready to work by the end of this year, but we do not have full details of how the scheme will work. It will cost a vast fortune in personnel, time and new computer equipment at a time when financial institutions are juggling with self-assessment, corporate tax self-assessment, the euro, the millennium bug and everything else.

Mr. Hammond: Does my hon. Friend agree that financial institutions face a major task in persuading existing regular savers in PEPs to sign the necessary paperwork to convert their contracts to continue saving regularly in ISAs, and that it is vital that we do not allow those people to slip through the net?

Mr. Loughton: That is right. Will we need to have completely new client agreements for PEP holders who

will hold ISAs? There is much paperwork still to be done. Six months on from the original disastrous consultation document, many questions remain, and we have no idea of the answers.
Will the money that can be transferred from TESSAs after their maturity be the capital or the capital and the interest? No answer has been given. Will TESSA holders be able to transfer the cash from the cash component of an ISA to the equity component? We do not know. There is a raft of questions on regulation and monitoring, which is of particular concern to older people who do not want the hassle and confusion of changes and much more paperwork. How will the reporting of what people have got in ISAs happen? Whom will they report to? How will we cope with the different components of ISAs being run by different plan managers in the same year? Who will monitor the multi-provider component parts to avoid the risk of over-subscription in one year or five years or whenever it will be?
When will we get details about the proposed maxi or mini ISAs that have been dangled in front of us by Treasury representatives? What happens when ISA holders reach the cash, insurance or equity ceiling when they have different plans with different managers over several years? What will happen with withdrawals? Will capital or accumulated income be taken out? Who will monitor it when it is put back a few years later? Who will oversee best advice on a continuing basis, particularly with the insurance element, which demands a higher degree of best advice?
When a 55-year-old goes to Tesco, which has a link with a large Scottish pension and investment product company, and decides among his frozen peas and bargain yoghurts to put money into his ISA, it is likely that he will be offered an ISA linked to that company's plan. That is fine; he may go back a few months later and add more money. He may have a regular savings plan. When that investment is no longer the most appropriate—it may have fallen from the first to the third or even fourth quartile—whose is the responsibility to advise that investor to move to a different product? What onus is there on a supermarket, whose major responsibility and profit centre is flogging groceries, to ensure that that investor continues to have the best and most appropriate investment?
That brings me to benchmarking, which was mentioned by the hon. Member for Northampton, North. When will we get the consultation document on benchmarking or kite marking? Whenever the Revenue opens its mouth, it leaves open more questions than it answers. The Paymaster General knows that the head of regulation at the Treasury, Paula Diggle, gave one of her many presentations on the subject at a recent meeting of the Personal Equity Plan Managers Association. She likened benchmarking to the pure new wool mark on jumpers or the real dairy cream mark on dairy products. It sounds simple, but wool shrinks and cream is full of clots and can go sour if it is not looked after properly. Investments can go wrong and markets can go down, but the Government want to attract 6 million virgin investors without making them properly aware of the risks of equity or insurance investment and no idea yet of how investors will get on-going best advice to ensure that they get the best deals. It is unclear how ISAs will work, how they will be regulated and how on-going best advice will be guaranteed.
Benchmarking is important because of its ability to make the market in ISAs grow fast, if it is to be successful. People will look for benchmarks, if that is how the Government are going to mark things, but what is benchmarking? I asked the hon. Member for Northampton, North about that earlier. It represents the replacement of advice and suitability tests with the judgment of the Government. It inherently means that the Government, through the Treasury, endorse the product as having a wide-ranging suitability for almost everyone. Before long, everyone will be shuffled into tracker funds. No doubt it will be called the people's tracker fund. All our 55-year-olds and younger investors will be encouraged to save in it by a nice little Government-approved benchmark, but if it goes wrong who is to blame? Where does the investor go for compensation?

Mr. Gibb: What would happen if all investors generally put their money into tracker funds, which track the stock exchange index? Would not that have a distorting effect on the stock market's top 100 or 200—depending on which index was being followed—companies?

Mr. Loughton: That would depend on what the fund was tracking. An artificial amount of money could go into one index that was being tracked. Inherently, tracker funds are fully invested. All the proposals have been formulated in a period in which markets have gone up by at least 20 per cent. over the past few years. At some stage, that bubble will burst. Growth may be more modest or markets may go down and tracker funds will track the relevant index down. Someone sucked into the Tesco hype by the ISA marketing glitz promulgated by the Paymaster General, who—

The Second Deputy Chairman: Order. The hon. Gentleman is straying wide of the amendments. I would be grateful if he returned to them.

Mr. Loughton: I apologise. I have almost finished. Benchmarking is a key issue and was raised by Labour Members.
I fear that if investments go the wrong way, as is highly possible, we will have a misbuying scandal that will make the Albanian pyramid selling scheme and the pensions business so often mentioned by Labour Members look like a tea party.

Ms Keeble: Will the hon. Gentleman give way?

Mr. Loughton: May I just make this point, as I am sure that the hon. Lady will take me up on it?
What is benchmarking actually benchmarking? Is it against charges—that someone is or is not offering a good-value product? Is it against the soundness and financial credibility of the investment manager handling the ISA products? Is it against the past investment performance of the products offered by that investment manager?

Ms Keeble: The hon. Gentleman has made much of the fact that people on low incomes who invest in ISAs

might suffer because tracker funds, into which some of the money may go, track the market downward as well as upward. Does he agree that one of the attractions of PEPs is that they allow entrance into an extremely lucrative market and that, by and large, stock market investments have gone up faster than the interest rates obtainable on conventional savings accounts? Part of the ISA's attraction is that it gives people on low incomes who cannot afford to go trundling off to a stockbroker access to the stock exchange and to the greater returns that that can give, accepting that there is of course a risk. Does he accept that—

The Second Deputy Chairman: Order. That is an extremely long intervention of a very general nature. I should be grateful if the hon. Member for East Worthing and Shoreham (Mr. Loughton), who is about to respond, is not drawn in that general direction, but returns to addressing the amendment.

Mr. Loughton: I shall indeed, Mr. Lord—I have almost finished my remarks. The hon. Lady makes an interesting point; the Paymaster General himself in Committee last year said:
There is no logic that I am aware of in share price movements."—[Official Report, Standing Committee A, 17 July 1997; c. 19.]
There is no guarantee that the stock market is a one-way bet, as the Lady suggests.

The Second Deputy Chairman: Order. The hon. Gentleman is an hon. Gentleman and the hon. Lady is an hon. Lady.

Mr. Loughton: I meant no disrespect—I do apologise to the hon. Lady and to you, Mr. Lord.
Earlier, I was asking what benchmarking is all about. We have no clear definition at all, which could lead to a false sense of security among the 6 million-strong army of virgin investors on whom the scheme is targeted. In a letter to the Independent Financial Advisers Association, the Treasury stated that ISAs were about encouraging ethnic minorities, families on low income and women to save. On that basis, is the benchmark to be based on the "Woman's Own" seal of approval, or on the endorsement of the Commission for Racial Equality? We simply do not know.
ISAs must succeed—we must get them right. We should by now have cleared up all those important questions, of which the largest and most worrying is that of benchmarking. If that is not resolved, it could result in the biggest ever misbuying scandal. Time is ticking away, yet, even at the Committee stage of the Bill, we do not have the consultation documents or some of the proposals on the mechanics of ISAs and how they are to work, and the ISAs themselves are still too complicated.

Mr. Nick St. Aubyn: I am grateful to my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) for carrying out such an effective demolition job on ISAs, because that will save me from having to repeat a number of points. However, I have several points I wish to make.
Drawing on my hon. Friend's point, the capital gains benefit for small savers simply does not exist within ISAs, nor does the income tax benefit. The Government have already knocked that away with their changes to the system of corporation tax. There is not only a new pensions tax, but a new ISAs tax, in that distributions by companies will already have suffered corporation tax and there will be no offsetting credit. It is contradictory for the Government to claim that what is primarily an equity investment vehicle will be attractive to lower rate taxpayers and, at the same time, to say that they have made the changes to corporation tax in order to encourage companies not to make distributions and to invest the money in the company for capital gain instead.

The Second Deputy Chairman: Order. I have to remind the hon. Gentleman quite firmly that the amendments before the Committee are tightly drawn and he must direct his remarks to them.

Mr. St. Aubyn: What I am coming to is that the amendments propose to relax the rules relating to ISAs, so that small-scale savers, for example, are not obliged to invest in equities, but can invest most of their ISA in interest-bearing accounts, where they can at least gain the full income tax benefit without the offset of corporation tax.

Ms Keeble: The hon. Gentleman says that the amendment would relax the rules so that people could put more money into interest-bearing savings accounts, yet the amendment applies only to savers over the age of 55. What he is saying is not borne out by the amendment, because that would impose a restriction on ISAs and not relax the rules.

Mr. St. Aubyn: The whole system of ISAs is flawed, because the Government are yet again changing the rules and making saving more complicated. That alone will deter investment by the very people whom the Government claim they want to encourage to save—the 6 million so-called potential savers.
The Financial Secretary is mistaken to think that the fact that PEPs and TESSAs give most advantage to relatively well-off people somehow goes against the interests of the less well-off. When people in this country save, it is to the benefit of the entire economy; when people save, it is to the benefit of the overall level of investment in our economy. The reason why the Opposition oppose the Government's measures is that they discourage saving in many ways—we see that in the Red Book projections—and discourage investment.
The Government claim that they want small savers to save money, but, by their policies, they cannot even save such people's jobs because we are on the threshold of a recession in manufacturing. It is unrealistic of the Government to think that those who have no spare cash will start to save discretionary sums, not only in deposit accounts, but in higher risk equities. That is simply to misunderstand the needs and aspirations of the very group of people whom they claim to represent. They do not do so. At least the amendments will increase the flexibility of the ISA scheme, so that those who aspire to participate

in it will know that it is slightly more open ended than the Government intend. That is why I support the amendments.

Mr. Gibb: I rise again to correct something I said earlier when speaking to amendment No. 8. I referred to Gavyn Davies, whereas I meant to refer to Andrew Dilnot, which puts a completely different complexion on my remarks—indeed, some might argue that it adds credibility to my remarks, given that Andrew Dilnot is director of the Institute for Fiscal Studies. In his evidence to the Treasury Select Committee in March, he made some powerful points and was quite damning of the Government's proposals. He said:
Almost all of the objectives that will now be achieved by the ISAs could equally have been achieved by abolishing the five year lock-in period on TESSAs and leaving things as they were. If we really thought we wanted to have some life insurance in a tax free regime, we should have allowed £1,000 life assurance into PEPs. While the consultation period has allowed some of the undoubtedly extremely problematic suggestions made last December to be removed and we are left with something which is broadly sensible, we could have got there with a great deal less sound and fury. Now we are in a rather peculiar position where by the year 2000 we can have people with at least six different sorts of savings schemes: a PEP, a TESSA, a maxi ISA, a mini cash ISA, a mini life assurance ISA, and a mini stocks and shares ISA. This does seem to be an unnecessary proliferation of schemes.
While I am on my feet, I should mention that the Institute of Chartered Accountants is of the same opinion, believing that the new regime of ISAs and the costs that will be borne by those taking out an ISA are completely unnecessary. The Institute of Chartered Accountants says:
It is our conclusion that it would be more straightforward to amend the existing PEP and TESSA savings schemes rather than introduce a wholly new scheme, particularly as the proposed ISA does not appear to offer improved savings incentives, and in fact may well discourage many individuals from saving.

Mr. Geoffrey Robinson: As you said, Mr. Lord, the amendments are tightly drawn. However, our debate has been slightly wider. In effect, amendment No. 5 is a paving amendment, leading into amendment No. 7, which would allow those aged over 55 to invest more than £1,000, during the lifetime of the scheme, in cash. One might equally argue that younger people should be encouraged in that direction, but to argue in favour of the amendment, as the right hon. Member for Hitchin and Harpenden (Mr. Lilley) did, is to misunderstand what the revised savings scheme is about.
Surprisingly, the hon. Member for East Worthing and Shoreham (Mr. Loughton) says that he has parliamentary written answers in which we say that the new scheme will cost more than the previous PEPs and TESSAs regime. I should like to see them. I shall hasten to be corrected if I am wrong, but I believe that we said in the Budget and in the Red Book—the Red Book figures show this to be the case—that, in the first year, the new scheme would cost the same as the previous scheme, then it would cost plus £30 million, then minus £30 million, giving broadly the same cost in terms of tax relief for the new system as for the old system. [Interruption.] I shall give the hon. Member for Sevenoaks (Mr. Fallon) the page reference if he needs it. I do not recollect—although I stand to be corrected—that we have ever said that the cost would be any more than that.
The entire effort of the new scheme is directed at re-balancing the tax relief to encourage the half of the population who have, and make, no savings at all to save. Although the hon. Member for Guildford (Mr. St. Aubyn) may think it derisory, it is a worthy aim, and it has found widespread support. We should not be as pessimistic as he is about its eventual success. I believe that the Conservatives cannot bear the tremendous welcome that the revised proposals are receiving. They cannot bear the fact that we have consulted and that we have such a wide measure of support for our present proposals.
My hon. Friend the Financial Secretary received from Lloyds bank a rather good document, entitled "The new Individual Savings Account (ISA)", because she happens to hold a present PEP—I am proud that she does. It says:
Lloyds Bank is dedicated to providing customers with good savings products and we believe that ISAs will offer customers many benefits.
I would try your patience, Mr. Lord, if I were to quote the many welcomes that our revised proposals have received. None of those people has come to us with the bizarre proposals that we have received from the official Opposition.

Mr. Loughton: I do not want to be flippant; I just wonder what advice the Paymaster General has received from his own bank, whether he has a PEP and whether he will take out an ISA.

Mr. Robinson: I cannot give advice to anyone on these matters, but I can tell the hon. Gentleman that we have had a warm welcome from his organisation. I shall not embarrass him by reading the letter that I have in my pocket from his chairman, a most distinguished City figure, congratulating us on our consultation process. Indeed, the chairman of Autif said that it was a model of consultation. It did not always feel like that from my side of the—

Mr. St. Aubyn: rose—

Mr. Robinson: If the hon. Gentleman wants to make a point on the amendments, I give way to him.

Mr. St. Aubyn: Is the Minister telling us that the process is a model of consultation because he listened to Conservative representations to lift the cap on the size of ISAs?

Mr. Robinson: It was a model of consultation because we listened and acted on what we heard, and because the Government are not afraid to consult, to change their mind and to improve things in the light of consultation. That is what it is all about. Two or three things came out of the consultative phase—nothing that relates to the amendments, or to much that Conservative Members have said about them today.
The sole purpose of the proposals was to re-balance the system within the existing tax costs and, in doing so, to encourage those who do not save, to save. There is, therefore, no point in focusing on 55-year-olds and over any more than on anyone else. We are focusing on the half of the population who make no savings. That is why

it is so encouraging that Schroder, Safeway, Halifax, Pepma, M & G, Fidelity, Virgin and Barclays, to name but a few, say that they will offer the ISA programme—the cash ISA in particular. If we are to make a breakthrough in savings, it must be through the cash ISA, and at £1,000 a year, with £2,000 extra in the first year if it is taken up in that way, it is already at a more than adequate level at which to target those who do not save.

Mr. Loughton: rose—

Mr. Robinson: I shall give way once more, but I must make progress.

Mr. Loughton: On a technical point, will the Paymaster General admit that the policy that a 55-year-old could buy with his insurance money within an ISA would be substantially less attractive than the amount that a 25 or 35-year-old could buy because of his age, health and so on, so there is good reason for giving him extra favourable treatment later in life?

Mr. Robinson: Conservative Members do not seem to want to take the point that we want to encourage the half of the population who do not save at all to save. That is the sole criterion; that is what we are trying to encourage. The hon. Gentleman, unlike the hon. Member for Guildford, welcomed the ISA—they might decide where they stand on this matter—and raised a raft of valid technical points. I assure him that the draft regulations will be published next month, and that we shall get down to the hard work that is needed in that regard. I can reassure him on one point now, however, and that is that the TESSAs to be transferred will be capital only, as was the case, as he will readily concede, when the Conservatives were in government. That is what they did in rolling over TESSAs.
Amendment No. 8 deals with charges. We can see no point in the official Opposition's proposal that costs should be limited to the average of those currently charged for administering PEPs. We are trying to drive down costs, and we are driving them down; that is the point of benchmarking. However, it is a free market, so if people want to offer a complicated product, it is up to them, and it is up to sophisticated investors who would be tempted by it to decide whether to take it. To be prescriptive in that way runs so counter to the Opposition's usual thinking that I am surprised by the amendment.
For all those reasons—

Mr. St. Aubyn: Will the Paymaster General give way?

Mr. Robinson: I give way one last time.

Mr. St. Aubyn: The Paymaster General has told us that he believes in a free market in charges. Will he explain why, under the Bill, those who have PEPs—which, as he says, will now be frozen—will be unable to switch their frozen PEP to another fund manager, to allow competition to continue on charges for those on-going PEPs?

Mr. Robinson: We have arranged that a very good system of competition will apply to the ISA product, and


that is the important benefit on which we must concentrate, which seems to be lost on Conservative Members.
I have done my best to explain our reasoned opposition to these interlinking amendments, which have rightly been taken together, and I must advise the Committee to resist them.

Mr. Michael Fallon: First, I should declare that I, too, have a PEP, but I have not received the glossy leaflet that the Financial Secretary has had. Perhaps we should christen her bank the crawling bank—the bank that likes to say, "Yes, yes". I look forward to hearing from my PEP provider in similar vein.
We tabled amendment No. 8 simply because it is important to get some control of the administrative costs of what the Paymaster General, I notice, now calls the RSS—his revised savings scheme. I do not know whether he is officially christening it in that way. As he is aware, the PEP rules run to more than 100 pages. They were composed under an efficient, benevolent Government. What is the point of having a new set—another 100 pages—of administrative rules for the ISA?
Would it not be better if the Paymaster General accepted that the Government have got all this wrong? Why should not the ISA simply be a PEP 2, or why did he not allow an instant-access TESSA? If he is going ahead with this bureaucratic new savings account, it is important that we reduce costs.
We have other concerns about costs, which is why we want a statutory cap on them. First, will the ISA lie inside or outside the provisions of the Financial Services Act 1986? Perhaps the Paymaster General will help us on that point. If the ISA lies outside the 1986 Act, there will, presumably, have to be a compensation scheme if ISAs are mis-sold, and those who are inside the provisions of the 1986 Act will presumably have to fund such a scheme. Will advisers who come under the provisions of the 1986 Act be allowed to retail ISAs under the same rules as non-regulated retailers, or will the Paymaster General regulate covertly those who retail ISAs generally? We have heard in speech after speech on financial services and from the Paymaster General that the Government want to drive down costs. The best way in which to do that is to put a statutory cap in the Bill, which is the purpose of amendment No. 8.
8 pm
We had a brief but revealing debate on amendments Nos. 5 and 7. Almost nothing in the Bill does anything for pensioners. The Red Book devotes only six lines to them, three of which repeat part of the pre-Budget report. We knew that the Bill ignored the interests of pensioners, but this is the first time since the Budget that pensioners have been attacked.
In an extraordinary speech, the hon. Member for Northampton, North (Ms Keeble) described the pensioners' amendment as mean minded. Was she describing Saga as mean minded? Was she describing those who want to protect the interests of older pensioners who have never saved before as mean minded? If she examines her speech in the cold light of tomorrow, she will see its illogicality. She rightly went on to argue that she wanted ISAs to be most attractive to those who have no other savings. To achieve that, the ISA must be right for older new savers as well as for younger new savers.
Our amendment would not reduce the attractiveness of the ISA for younger savers; it would deal with the position of those who are getting on and are over 55—the hon. Lady is one of the younger members of the Committee—who will not be able to take the same advantage of an ISA as she might. The life assurance limit of £1,000 offers far less protection for a 55-year-old than for a 35-year-old. The account would be held for a briefer period, so people of that age would have less time to ride out market fluctuations and build up an account that would serve them well in retirement.
The amendment would ensure that, within the annual limit that is being imposed, the proportion that goes into life assurance could be greater for older people than is prescribed by the Bill.

Ms Keeble: Does the hon. Gentleman accept that I referred to over-55s in the top decile of income earners?

Mr. Fallon: Some over-55s will be in the top decile of income earners, but we are both discussing helping those with no savings. We must encourage some of the people in that group to take out an ISA, which is why the life assurance limit must not discriminate against people who happen to be 55 or over. I hope that the hon. Lady will support us on the amendment.
The Paymaster General should reconsider his view on the amendment, for three reasons. First, he will be 60 next month, so he has an interest in it. He may not have had time to concentrate on his life assurance policy, among his other investments and financial affairs. We want to ensure that he is not disadvantaged against other hon. Members, so I hope that, for his own sake, he will reconsider and speak up for pensioners.
Secondly, the Paymaster General has repeatedly said that he will listen. The £1,000 limit is not in the Bill; like almost every other matter that we are debating, it will be dealt with in regulations. I hope that he is prepared to reconsider, because those who are getting on in life will not be able to take the same advantage of the £1,000 limit as those who are younger.
Thirdly, the Paymaster General has listened before, which is why we hope for a change of view. The previous time that he faced us over the Dispatch Box, he was still defending the £50,000 limit. On the surface, that limit has disappeared. Other aspects of the ISA have gone as well—we have not heard much of the proposed annual raffle—but the internal limits remain, and they deeply discriminate against the over-55s. For those reasons, I invite the Committee to support the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 118, Noes 275.

Division No. 256]
[8.6 pm


AYES


Ainsworth, Peter (E Surrey)
Bruce, Ian (S Dorset)


Arbuthnot, James
Chapman, Sir Sydney


Atkinson, David (Bour'mth E)
(Chipping Barnet)


Atkinson, Peter (Hexham)
Chope, Christopher


Baldry, Tony
Clappison, James


Bercow, John
Clarke, Rt Hon Kenneth


Beresford, Sir Paul
(Rushcliffe)


Boswell, Tim
Clifton—Brown, Geoffrey


Brazier, Julian
Collins, Tim


Browning, Mrs Angela
Colvin, Michael






Cormack, Sir Patrick
MacKay, Andrew


Cran, James
Maclean, Rt Hon David


Dafis, Cynog
McLoughlin, Patrick


Davies, Quentin (Grantham)
Malins, Humfrey


Davis, Rt Hon David (Haltemprice)
Maude, Rt Hon Francis


Dorrell, Rt Hon Stephen
Mawhinney, Rt Hon Sir Brian


Duncan, Alan
May, Mrs Theresa


Emery, Rt Hon Sir Peter
Moss, Malcolm


Evans, Nigel
Nicholls, Patrick


Ewing, Mrs Margaret
Ottaway, Richard


Faber, David
Page, Richard


Fabricant, Michael
Paice, James


Fallon, Michael
Paterson, Owen


Forth, Rt Hon Eric
Pickles, Eric


Fowler, Rt Hon Sir Norman
Prior, David


Fraser, Christopher
Randall, John


Gale, Roger
Redwood, Rt Hon John


Garnier, Edward
Robertson, Laurence (Tewk'bry)


Gibb, Nick
St Aubyn, Nick


Gill, Christopher
Sayeed, Jonathan


Gorman, Mrs Teresa
Shephard, Rt Hon Mrs Gillian


Gray, James
Shepherd, Richard


Green, Damian
Simpson, Keith (Mid—Norfolk)


Greenway, John
Soames, Nicholas


Grieve, Dominic
Spelman, Mrs Caroline


Hamilton, Rt Hon Sir Archie
Spicer, Sir Michael


Hammond, Philip
Spring, Richard


Heald, Oliver
Steen, Anthony


Heathcoat—Amory, Rt Hon David
Swayne, Desmond


Hogg, Rt Hon Douglas
Swinney, John


Horam, John
Syms, Robert


Hunter, Andrew
Taylor, lan (Esher & Walton)


Jack, Rt Hon Michael
Taylor, John M (Solihull)


Jackson, Robert (Wantage)
Taylor, Sir Teddy


Johnson Smith,
Townend, John


Rt Hon Sir Geoffrey
Tredinnick, David


Jones, leuan Wyn (Ynys Môn)
Viggers, Peter


Key, Robert
Wardle, Charles


King, Rt Hon Tom (Bridgwater)
Waterson, Nigel


Kirkbride, Miss Julie
Welsh, Andrew


Laing, Mrs Eleanor
Whittingdale, John


Lait, Mrs Jacqui
Widdecombe, Rt Hon Miss Ann


Lansley, Andrew
Wigley, Rt Hon Dafydd


Leigh, Edward
Wilshire, David


Letwin, Oliver
Winterton, Mrs Ann (Congleton)


Lidington, David
Winterton, Nicholas (Macclesfield)


Lilley, Rt Hon Peter
 Woodward, Shaun


Lloyd, Rt Hon Sir Peter (Fareham)
Yeo, Tim


Young, Rt Hon Sir George



Llwyd, Elfyn



Loughton, Tim
Tellers for the Ayes:


MacGregor, Rt Hon John
Sir David Madel and


McIntosh, Miss Anne
Mr. Stephen Day.




NOES


Abbott, Ms Diane
Blizzard, Bob


Adams, Mrs Irene (Paisley N)
Borrow, David


Ainsworth, Robert (Cov'try NE)
Bradley, Peter (The Wrekin)


Alexander, Douglas
Bradshaw, Ben


Allan, Richard
Breed, Colin


Allen, Graham
Brinton, Mrs Helen


Anderson, Janet (Rossendale)
Brown, Rt Hon Nick (Newcastle)


Ashton, Joe
Brown, Russell (Dunfries)


Atkins, Charlotte
Bruce, Malcolm (Gordon)


Ballard, Mrs Jackie
Burden, Richard


Banks, Tony
Burden, Colin


Bayley, Hugh
Butler, Mrs Christine


Beard, Nigel
Byers, Stephen


Beckett, Rt Hon Mrs Margaret
Coborn, Richard


Begg, Miss Anne
Campbell, Alan (Tynemouth)


Bell, Martin (Tatton)
Campbell, Mrs Anne (C'bridge)


Benn, Rt Hon Tony
Campbell, Menzies (NE Fife)


Bennett, Andrew F
Campbell, Ronnie (Blyth V)


Benton, Joe
Campbell —Savours, Dale


Best, Harold
Canavan, Dennis


Blackman,Liz
Cann, Jamie





Caplin, Ivor
Howarth, Alan (Newport E)


Casale, Roger
Howarth, George (Knowsley N)


Caton, Martin
Howells, Dr Kim


Chapman, Ben (Wirral S)
Hoyle, Lindsay


Chidgey, David
Humble, Mrs Joan


Chisholm, Malcolm
Hurst, Alan


Clark, Dr Lynda
Hutton, John


(Edinburgh Pentlands
Iddon, Dr Brian


Clark, Paul (Gillingham)
Jackson, Ms Glenda (Hampstead)


Clarke, Eric (Midlothian)
Jenkins, Brian


Clelland, David
Johnson, Alan (Hull W & Hessle)


Clwyd, Ann
Johnson, Miss Melanie (Welwyn Hatfield)


Cohen, Harry



Coleman, lain
Jones, Barry (Alyn & Deeside)


Connarty, Michael
Jones, Ms Jenny (Wolverh'ton SW)


Cook, Frank (Stockton N)



Corbyn, Jeremy
Jones, Jon Owen (Cardiff C)


Cousins, Jim
Kaufman, Rt Hon Gerald


Crausby, David
Keeble, Ms Sally


Cryer, Mrs Ann (Keighley)
Keen, Ann (Brentford & Isleworth)


Cummings, John
Kennedy, Jane (Wavertree)


Cunliffe, Lawrence
Kidney, David


Cunningham, Jim (Cov'try S)
Kilfoyle, Peter


Dalyell, Tam
King, Andy (Rugby & Kenilworth)


Darling, Rt Hon Alistair
Kingham, Ms Tess


Davidson, Ian
Kirkwood, Archy


Davies, Rt Hon Denzil (Llanelli)
Kumar, Dr Ashok


Davies, Geraint (Croydon C)
Ladyman, Dr Stephen


Davis, Terry (B'ham Hodge H)
Lawrence, Ms Jackie


Dean, Mrs Janet
Laxton, Bob


Denham, John
Lepper, David


Dewar, Rt Hon Donald
Leslie, Christopher


Dobbin, Jim
Levitt, Tom


Dowd, Jim
Livingstone, Ken


Drew, David
Lock, David


Drown, Ms Julia
Love, Andrew


Eagle, Angela (Wallasey)
McAllion, John


Eagle, Maria (L'pool Garston)
McAvoy, Thomas


Edwards, Huw
McCabe, Steve


Ellman, Mrs Louise
McCafferty, Ms Chris


Ennis, Jeff
McCartney, Ian (Makerfield)


Etherington, Bill
McDonnell, John


Fatchett, Derek
McFall, John


Feam, Ronnie
McGuire, Mrs Anne


Fisher, Mark
Mclsaac, Shona


Flynn, Paul
McKenna, Mrs Rosemary


Foster, Michael Jabez (Hastings)
Mackinlay, Andrew


Foster, Michael J (Worcester)
McNamara, Kevin


Foulkes, George
McWilliam, John


Fyfe, Maria
Mallaber, Judy


Galloway, George
Marsden, Gordon (Blackpool S)


Gardiner, Barry
Marshall, David (Shettleston)


George, Bruce (Walsall S)
Marshall-Andrews, Robert


Gerrard, Neil
Maxton, John


Gibson, Dr lan
Meacher, Rt Hon Michael


Gibson, Dr Norman A
Merron, Gillian


Godsiff, Roger
Michie, Bill (Shefld Heeley)


Golding, Mrs Llin
Michie, Mrs Ray (Argyll & Bute)


Gorrie, Donald
Milbum, Alan


Griffiths, Jane (Reading E)
Mitchell, Austin


Griffiths, Nigel (Edinburgh S)
Moffatt, Laura


Hall, Mike (Weaver Vale)
Moonie, Dr Lewis


Hall, Patrick (Bedford)
Moran, Ms Margaret


Hanson, David
Morgan, Ms Julie (Cardiff N)


Heal, Mrs Sylvia
Morgan, Rhodri (Cardiff W)


Heath, David (Somerton & Frome)
Morris, Ms Estelle (B'ham Yardley)


Henderson, lvan (Harwich)
Morris, Rt Hon John (Aberavon)


Hepburn, Stephen
Mudie, George


Heppell, John
Murphy, Denis (Wansbeck)


Home Robertson, John
Murphy, Jim (Eastwood)


Hood, Jimmy
Murphy, Paul (Torfaen)


Hoon, Geoffrey
O'Brien, Mike (Warks)


Hope, Phil
Olner, Bill


Hopkins, Kelvin
Organ, Mrs Diana






Osborne, Ms Sandra
Smith, Miss Geraldine


Palmer, Dr Nick
(Morecambe & Lunesdale)


Pearson, Ian
Smith, John (Glamorgan)


Perham, Ms Linda
Smith, Sir Robert (W Ab'd'ns)


Pickthall, Colin
Speller, John


Pike, Peter L
Squire, Ms Rachel


Plaskitt, James
Starkey, Dr Phyllis


Pope, Greg
Steinberg, Gerry


Pound, Stephen
Stevenson, George


Powell, Sir Raymond
Stewart, David (Inverness E)


Prentice, Ms Bridget (Lewisham E) Stewart, Ian (Eccles)



Prentice, Gordon (Pendle)
Stinchcombe, Paul


Primarolo, Dawn
Stott, Roger


Prosser, Gwyn
Strang, Rt Hon Dr Gavin


Purchase, Ken
Stringer, Graham


Quin, Ms Joyce
Stuart, Ms Gisela


Quinn, Lawrie
Stunell, Andrew


Radice, Giles
Taylor, Rt Hon Mrs Ann (Dewsbury)


Rammell, Bill



Rapson, Syd
Taylor, Ms Dari (Stockton S)


Raynsford, Nick
Taylor, Matthew (Truro)


Reed, Andrew (Loughborough)
Thomas, Gareth (Clwyd W)


Reid, Dr John (Hamilton N)
Thomas, Gareth R (Harrow W)


Rendel, David
Timms, Stephen


Robertson, Rt Hon George
Tipping, Paddy


(Hamilton S)
Trickett, Jon


Robinson, Geoffrey (Cov'try NW) Truswell, Paul



Roche, Mrs Barbara
Turner, Dennis (Wolverh'ton SE)


Rogers, Allan
Turner, Dr Desmond (Kemptown)


Rooker, Jeff
Turner, Dr George (NW Norfolk)


Ross, Ernie (Dundee W)
Twigg, Derek (Halton)


Roy, Frank
Tyler, Paul


Ruane, Chris
Walley, Ms Joan


Ruddock, Ms Joan
White, Brian


Russell, Bob (Colchester)
Williams, Rt Hon Alan


Sanders, Adrian
(Swansea W)


Savidge, Malcolm
Williams, Alan W (E Carmarthen)


Sawford, Phil
Williams, Mrs Betty (Conwy)


Sedgemore, Brian
Willis, Phil


Sheerman, Barry
Wise, Audrey


Sheldon, Rt Hon Robert
Wood, Mike


Simpson, Alan (Nottingham S)
Wright, Anthony D (Gt Yarmouth)


Skinner, Dennis



Smith, Rt Hon Andrew (Oxford E) 
Tellers for the Noes:


Smith, Angela (Basildon)
Mr. Clive Betts and


Smith, Rt Hon Chris (Islington S)
Mr. David Jamieson.

Question accordingly negatived.

Mr. Lilley: I beg to move amendment No. 6, in page 60, line 32, after 'account', insert
'which may (if the investor so wishes) be retained for the remainder of his life'.
One of the most significant proposals in the original plans that the Government announced for individual savings accounts was the one to introduce a lifetime limit of £50,000 as the maximum amount of tax-exempt savings that people could put into their replacements for PEPs and TESSAs. That was punitively low by comparison with the amount necessary to buy a modest pension. Indeed, I have already pointed out how small the amount is compared with what a long-serving Member of Parliament, such as the hon. Member for Bolsover (Mr. Skinner), who raised the issue, would be entitled to by way of a pension. To buy a pension equivalent to the hon. Gentleman's would cost about £350,000, so setting a limit of £50,000 for people's savings was a damaging threat.
It was especially offensive that the proposals came from the Paymaster General, who has such large amounts in tax-favoured forms in the Channel Islands. That is why

there was such outrage in the country at the suggestion that this limit should be imposed. It was also wrong because it was unworkable in practice, in that following through people's ownership of ISAs over a lifetime would be very difficult; monitoring and maintaining the requisite records would have imposed a great cost on the providers. We are therefore glad that the £50,000 limit has gone.
The suspicion remains, however, that the Labour party would like to bring back the limit through the back door. The Government have promised to guarantee ISAs only for 10 years. In a possibly Freudian slip, the Paymaster General earlier today referred to people being allowed to invest £1,000 a year during the lifetime of the scheme. He clearly continues to think that there is to be a lifetime limit on investments in the scheme. The 10-year guaranteed life effectively means that people can put £5,000 a year aside for 10 years: we are back at the £50,000 lifetime limit, by the back door.
Our suspicions are fuelled by the fact that the Government refused to put their so-called guarantee in legislation. Nowhere in the Bill is there to be found any assurance to those who take out ISAs that they will be able to keep them for any period, let alone 10 years. We believe that a period of 10 years is grossly inadequate. People want to be sure that, when they put money in such schemes, they can keep them for the rest of their lives. They are saving, by and large, for retirement. They do not want their tax exemptions to disappear after 10 years.
We have therefore specified in this important amendment that, not just for 10 years but for the rest of their lives, people will be able to keep the ISAs that they have taken out. We should be interested to hear from the Paymaster General any reasons he has for opposing the amendment. We will look closely at his words, as we look suspiciously at his Freudian slip earlier today, to see whether the Government are suggesting that there should be some limit on the duration of the rather minimal tax reliefs available under the legislation that they propose.

Mr. St. Aubyn: I support amendment No. 6. No one who saw the success of PEPs and TESSAs would honestly claim that there was a good case for changing a successful system. I am not a keen supporter of ISAs, because they are second best. We had a thoroughly good scheme before. If we are to have ISAs, however, let the Opposition's success in arguing for the lifting of the cap on ISAs be written into the Bill, as my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) urged.
It is extraordinary how much power the Bill leaves to the discretion of the Treasury. In so many of the areas touched by the Bill, the Government want to keep all their cards up their sleeve. That is characteristic of this Government in so many aspects of their policy. Now we see it in their Treasury policy.
There are only two reasons for rejecting the amendment. The first is that the Government wish to preserve the cap of £50,000 by the back door. The second is that they want to keep to themselves as much discretion and power as possible, and leave as little as they must for debate and scrutiny in the House of Commons.
Amendment No. 6 would encourage people's wider aspirations. We have heard the Government argue that the point of ISAs is to redirect savings incentives to those on lower incomes. We must all encourage those on lower


incomes to save, but, if they have very little discretionary money available for saving, the amount that we can encourage them to save through a discretionary scheme will be limited.
If the Government want those on lower incomes to save more—for example, to provide more for their own needs in the future, particularly for their retirement needs—the Government should be honest and set out their proposals for a more rigorous and disciplined system for people to save for the long term. They would thereby make it clear that they want people to save for their future needs, not just for their future aspirations—additional spending opportunities over and above their needs.
That is why most people would put money into ISAs, as they put money into PEPs and TESSAs. They put the money in because they did not need it immediately. In many cases, they did not need to save all the money, but they saw that, by saving it through that mechanism rather than spending it immediately, they might have wider spending opportunities. They might be saving towards a daughter's wedding, a world cruise on their retirement or a second honeymoon. Such were the objectives of many people who put large sums into PEPs and TESSAs.
Now the Government are changing the nature of the scheme and encouraging those on much lower incomes to get involved, but they cavil at the suggestion that people should put in more than £50,000. They do not want to give even that encouragement. They do not want people to venture even that far in their hopes and aspirations. It says a great deal about the Government that they are not prepared to make such a commitment.

Mr. Gardiner: I had no intention of speaking on the amendment, but I feel compelled to do so because of the cavalier way in which the Opposition insist on confusing a guarantee with a manacle. It is clear that the Chancellor has offered a guarantee that the scheme will continue for at least 10 years, because the Government appreciate the need to give long-term security to investors. It is to be welcomed, especially as it far exceeds any guarantee on PEPs made by the Conservatives when in government.

Mr. St. Aubyn: Is not the difference between the present Government and the previous one that the previous Government did not break the promises and undertakings they made before an election, in the context of PEPs and TESSAs? Because the Government sought to break their word, they must now give more cast-iron guarantees.

Mr. Gardiner: I am delighted to respond to that question. It is breathtaking to be lectured by the Opposition on a Government breaking their word. The Conservatives were indicted year on year for breaking their word in government, particularly their tax pledges. The categorical pledges on VAT made before the general election in 1992 were consigned to the waste paper bin within weeks afterwards. We will take no lectures on that.
On clause 75, it is clear that the Chancellor sought to give some long-term security to investors who might be induced to come into ISAs. That was not previously done.

No Government would seek to manacle themselves in terms of tax for an indefinite period. That period might be as long as 70 years.

Mr. Gibb: The Government have caused enormous damage to the confidence of savers. The first colossal damage was done in the July Budget, when the Government decided to abolish the repayment of dividend tax credits. That took £5 billion a year out of the nation's pension funds and dented people's confidence in pension funds as a vehicle for savings. It dented the concept of savings.
The Government then decided to announce the abolition of PEPs and TESSAs during the Finance Bill discussions in July and the months that followed. That, too, damaged people's confidence in savings. The nonsense of the initial proposals for the £50,000 limit added to the lack of confidence in the savings tax regime. It is odd that the Chancellor feels the need to guarantee the survival of the ISA scheme for 10 years. When the Conservative Government introduced PEPs and TESSAs, they announced no such guarantee. Nobody believed that it was necessary to specify the length of the reliefs provided, because everyone assumed that they would last indefinitely. The purpose of those schemes was to encourage people to save for the long term, and those schemes were enormously successful.

Mr. Hammond: Does my hon. Friend agree that the difference is that people believed that the last Government were genuinely committed to the principle of encouraging long-term savings, whereas they believe that this Government have merely embarked on a cosmetic exercise?

Mr. Gibb: My hon. Friend makes a very valid point. I have asked myself why the Government have decided to abolish TESSAs and PEPs and replace them with ISAs, which are a pale facsimile. Why did the Government not simply tinker with TESSAs and PEPs? The only possible reason is that the Government want to be rid of a successful, Conservative-inspired policy for purely vindictive, political reasons.

Mr. Loughton: Does my hon. Friend agree that the Government's proposal is in complete contrast to the message that we usually hear from Ministers? They claim repeatedly that they cannot commit a future Government to current measures. Therefore, there is no guarantee that this proposal will survive. What will happen in five years—

The First Deputy Chairman of Ways and Means (Mr. Michael J. Martin): Order. The hon. Gentleman must be brief.

Mr. Loughton: What will happen in five years if the Government decide that too much tax relief is lost? That is what they did in this case, and they tried to penalise PEP holders retrospectively until we objected.

Mr. Gibb: My hon. Friend makes a valid point. Labour right hon. and hon. Members have given commitments that have subsequently been breached. The Labour party


gave a commitment during the election campaign that there would be no increases in taxation, yet, within two months of coming to power, Labour introduced measures that would raise £5 billion a year from the nation's pension funds. It is clear that the Government have decided to abolish the successful TESSAs and PEPs and replace them with the less successful ISAs for purely dogmatic reasons. That decision will return to haunt them in the future.
The Treasury Select Committee examined the 10-year guarantee, and its conclusions are quite damning. It makes the same point that my right hon. Friend the Member for Hitchen and Harpenden (Mr. Lilley) raises in the amendment. The report states:
The abolition of the life-time limit was mentioned in the FSBR but not announced by the Chancellor in his speech; he did announce that the ISA system would continue in place for an initial ten years, with a review after seven years. As the annual investment limit is £5,000 (£7,000 in the first year), the effective total investment (apart from TESSA capital) would amount to only £52,000 after ten years.
It is there in black and white in the report of the Treasury Select Committee, which comprises a majority of Government Members. The report states that the total investment would be only £52,000 after 10 years. It sounds as though the members of the Treasury Select Committee agree with my right hon. Friend that this is a lifetime limit by the back door because the amount one can invest is limited to
only £52,000 after ten years".
Will the Paymaster General confirm that the Government do not intend to end the scheme after 10 years or to review it after seven years with the possibility of not continuing it after 10 years? If he provides that confirmation today, it will begin to redress the damage to savings that the Government have caused, and which they acknowledge in the declining savings ratio that is set out in a table in the Red Book.
The Treasury Select Committee raised another issue regarding the prize draw, to which my hon. Friend the Member for Sevenoaks (Mr. Fallon) referred. Footnote 75 on page xi of the Treasury Select Committee report states:
Another proposal which was dropped without mention in either the Chancellor's speech or the FSBR was the monthly prize draw".
The Government have made another U-turn, sneaked out via a Budget press release and hidden in footnote 75 of the Treasury Select Committee's report.

Mr. Geoffrey Robinson: I find the Opposition's argument on this amendment bizarre. The Conservatives were in office for 18 years, and PEPs and TESSAs ran for much of that time. Every document relating to those schemes always stated clearly—although not always in bold or in headlines on the front cover—that tax rates and reliefs could change and that the investor should be aware of that fact. That degree of uncertainty existed. Indeed, the view was put around the City towards the fag end of their tired Administration that the Tories were looking seriously at ways of curtailing the cost of tax reliefs.
In this proposal, we are trying—I confirm to the Committee and to the right hon. Gentleman that the regulations will make it absolutely clear—to guarantee a minimum 10-year period in which tax reliefs will remain as they are now and cannot be reduced. That is an unprecedented guarantee for any Government to make. The Tories did not give similar assurances when they

were in government. We give that guarantee in order to ensure certainty in the market, long-term stability and a genuine incentive to save. Our proposal has met with an extremely strong response during the consultation period.

Mr. Lilley: The Paymaster General says that the regulations—which are not before the Committee and which are not available to inspect—will guarantee no reduction in tax relief during a 10-year period. Is he then saying that, after five years, the tax relief available to basic rate taxpayers will be extended and will continue for a full 10 years? In that case, the previous announcement that relief would end after five years is no longer valid.

Mr. Robinson: We mean exactly what we have said: tax reliefs will remain at at least their present levels for a 10-year period and we shall review the scheme.

Mr. Lilley: rose—

Mr. Robinson: I shall give way in a moment: I know the point that the right hon. Gentleman wants to make. What we have said is quite clear, and that is all we are saying: reliefs will last for 10 years and they will be reviewed after seven. The Government's commitment carries considerable weight because everyone knows that this Government will review the scheme in seven years. It is totally irrelevant whether the Opposition decide to join us in that commitment or threaten to change or withdraw the scheme and reduce the tax relief, because everyone knows that the Tories will not be in office to do that. Our position is quite clear. There is sourness on the part of the Opposition that the measure has been so well received by the financial savings institutions in the City of London.

Mr. Lilley: I am sorry that I did not make myself clear to the Paymaster General, but this is an important point. The Chancellor of the Exchequer said that the 10 per cent. tax credit for basic rate taxpayers taking out ISAs and investing in equities would disappear after five years; the Paymaster General has said that tax reliefs would remain unchanged for 10 years—which statement is true?

Mr. Robinson: We have made it clear that tax reliefs will be phased out after five years, and that remains the case.
I turn to some points raised by the hon. Member for Guildford (Mr. St. Aubyn), who was trying to be his usual helpful self but got into a terrible muddle. The proposals have been received extremely well. We are working for long-term stability. The clear commitment by existing institutions and by the new ones that want to join the scheme, such as Safeway and the other supermarkets, will ensure that we shall get new net savings.
There will not be the simple displacement factor to which the noble Lord Lawson referred when he introduced the scheme. He said, "This is not really about net increases in savings—we do not believe that—but it will increase the habit of investing in equities." That was the policy of the previous Government. Our policy is different: we want to generate genuine new savings. That is why we have no lock-in period and why we have guaranteed tax reliefs for 10 years, with a review after seven.
It is unnecessary to go further than that at this stage. No Government have gone as far as that: the previous Government never gave a similar undertaking. All the documents relating to PEPs made it absolutely clear that tax reliefs could change and that people would have to guard against that. If the Opposition are minded to push their ridiculous proposition to a vote in this amendment, we shall have to resist it. In dividing the Committee, the Opposition would be going clearly against the wide acceptance of the stability of the long-term commitment that the Government's proposal represents, which has been so well received by the industry.

Mr. Hammond: How would the Minister square the projected decline in the savings ratio with the net increase in savings that he is talking about?

Mr. Robinson: We do not need any lectures from the Opposition about savings ratios or the mis-selling of pensions or savings products. The past masters in both were the Opposition. That is the point they must take on board. For four years in the 1980s, they managed to achieve a negative savings ratio. Billions of pounds—

Mr. Hammond: Check the figures.

Mr. Robinson: Absolutely. Check the figures. The hon. Gentleman will find that he is wrong. Indeed, he has been wrong already on one point, but he has not had the grace to admit it. The Opposition managed to achieve a negative savings ratio in the 1980s, and I shall send him the figures to prove it. We need no lectures on any of that from Opposition Members.
Everything that we have been doing—the Government have been committed to this approach and all our economic policies have been about this since we formed our Administration, including the operational independence of the Bank, the code of fiscal stability and the evening of the playing field on forms of investment—is designed to achieve long-term stability and long-term growth. That is best for savings, best for incomes and best for the country.

Amendment negatived.

Clause 75 ordered to stand part of the Bill.

Clause 147

STAMP DUTY ON CONVEYANCE OR TRANSFER ON SALE

Mr. David Heathcoat-Amory: I beg to move amendment No. 10, in page 136, line 32, at end insert—
'(4A) This section shall not apply to properties which are subject to uniform business rate.'.
I shall give my reasons for moving the amendment in the context of a wider comment about the Bill, which is that it is a tax-raising measure. That is the general nature of the Bill, and the clause is very much part of that strategy.
We had a good deal of waffle in the Budget statement about the Budget being for investment and enterprise. However, wherever we look in the Bill we find an

increased tax burden, often on the precise sectors of the economy that are asked to produce additional jobs and more investment.
The Chancellor of the Exchequer said in his statement that stamp duty would rise from 1.5 to 2 per cent.—a 25 per cent. increase for the transfer of properties above £250,000 in value. For properties valued at more than £500,000, there would be a 50 per cent. increase in stamp duty from 2 to 3 per cent.
I have a commercial interest to declare as I am a director of a property company that is duly registered in the Register of Members' Interests. Perhaps right hon. and hon. Members may be affected in their private lives by having to pay increased stamp duty on house transactions. I do not think that many Members will be affected in that way, however, because the burden of the tax does not fall primarily on the house owner, contrary to what the Chancellor tried to put over in his Budget speech.
The right hon. Gentleman, having described the tax increase, said that it was
a change which leaves 98 per cent. of house transactions unaffected."—[Official Report, 17 March 1998; Vol. 308, c. 1110.]
He was therefore suggesting that the tax would be felt only by richer householders. The truth is that the burden falls on the commercial sector, not on the private householder. The Chancellor adopted a disingenuous way of describing the increase because three quarters of the tax is paid by commerce.
The burdens are considerable. In the current year, the extra burden of the tax will be £390 million, rising in the next financial year to £470 million. In the year 2000-01, the yield will be £520 million, so the yield from this tax will be more than half a billion pounds a year. The burden will fall on the sector of the economy that is asked in the welfare-to-work project to produce extra jobs.
In the Budget statement, we had an appeal for more investment. In the Red Book, which was subsequently published, we find that, although business investment has been rising strongly in recent years—it is recorded as rising at 7.75 per cent. last year—there is a projected stabilisation and then a small decline.
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The reason lies in the clauses that are before the Committee this evening. Quite simply—it is not a startling observation—if we tax business and reduce profits, the result is fewer jobs and less investment. More than that, such an approach inhibits mobility, flexibility and inward investment—those are all the things which the Government say that they are seeking to encourage. It is not surprising that the Association of British Insurers said that the measure was
a disincentive to productive business investment and efficiency.
The increased tax will be paid primarily perhaps by those selling commercial property. However, indirectly it will be paid by a much wider spectrum of businesses. Commercial tenants will pay because their landlords will seek to recover the additional cost of stamp duty through increased rents. The increased tax will provide a perverse incentive for those who are investing in property. For example, there will be an advantage in investing in property overseas in those countries that have lower property transfer taxes, especially those outside the European Union.
In the time available, I have undertaken a little research in the context of the European Union. There is a confused position because there is not even attempted harmonisation or standardisation in the description of taxes, let alone the rates and incidence of the taxes. Sometimes, they are described as property transfer taxes and at others as conveyancing taxes. Sometimes, the taxes are described, like our own, as stamp duty. Some taxes are collected at municipal level, some at regional level and others at national level.
Generally, most member states have higher equivalent taxes than we do. It seems that the French conveyancing tax is levied at an ordinary rate between 13.4 and 15.4 per cent. In Belgium, the standard rate for a similar tax is 12.5 per cent. The rate in the Netherlands is lower. It seems that 6 per cent. is normal for property transactions there. Ireland has a conveyancing duty on a sliding scale between 1 and 6 per cent. In Portugal, the tax is collected by the municipalities. The Library produced a figure of 10 per cent., that being normal on transfers of urban buildings or building land. There is a sliding scale for domestic properties. Germany seems to have a lower rate of 2 per cent. which is collected by the Lander government, so the picture on the continent is very mixed.
I mention that because one of our advantages up to now was that our stamp duty was comparatively low, and that at least contributed to our being an attractive haven for inward business investment, but the Government appear set on eroding that. Indeed, if we go on increasing stamp duty as we are going, we shall lose a very valuable competitive advantage. This could be connected with the fact that, a few months ago, the Government signed up to a code of conduct on business taxes to counter what the European Union is pleased to call harmful tax competition. One of my questions for the Paymaster General is whether the code of conduct on business taxation has implications for stamp duty and whether the Government are seeking to increase stamp duty under the guise of harmonisation, as there is undoubtedly pressure from that part of the European Commission that sees low taxes as unfair.
Another point worth dwelling on for a moment is which companies will primarily pay the increased stamp duty. It is well known in accountancy circles—I have to confess to being a chartered accountant, so I used to earn a living by doing such things—that large companies can on occasion avoid stamp duty by using various avoidance devices. The simplest concept is that a property to be transferred is owned by a subsidiary company, and it is the company rather than the property that is sold. If that is done offshore, in another tax jurisdiction, stamp duty can sometimes be avoided completely.
Of course, there are various anti-avoidance devices; nevertheless, it remains true that the sophisticated company which is well advised can often find ways around stamp duty. In a free trading world and a global environment in which many multinational companies have their headquarters in Britain, it is increasingly the case that, where avoidance can be secured, great time and effort go into securing it. It tends to be the smaller or medium-sized company, which is less sophisticated and less well advised, that pays the increased taxes upfront.
If the Paymaster General is intent on increasing stamp duty, is this not an opportunity to move to a slice rather than a slab system? Putting it as simply as I can, under the slab system if the value of a property moves even

£1 above the threshold of, say, £250,000, the higher rate of stamp duty is applied to the entire value rather than just to the extra slice. That can lead to a mysterious grouping of valuations just below the threshold, for obvious reasons, and people can attempt to divide up properties or sell the furniture and fittings separately in order to keep under the relevant value. However, it is inequitable that the extra charge should apply to the entire value of the property. Was this not an opportunity to move to a slice system, whereby the higher rate applied only to the top slice? I put that forward not as an amendment but as a genuine question to the Paymaster General. The higher the rates become, the more inequitable the system of assessment.
Our best solution is to remove clause 147 altogether and put things back to the way they were before Budget day. If that is not possible, our second-best option is to confine the proposal entirely to householders. If the Government really are anxious to tax people with large and expensive houses, amendment No. 10 does exactly that by exempting properties that are subject to the uniform business rate, so stamp duty would not be a tax on the commercial sector.
I commend the amendment to the Committee.

Mr. Hammond: I welcome the opportunity to speak in support of the amendment. I shall declare an interest over and above the interest that all hon. Members have as owners or aspiring owners of houses, in that I have an interest in a small house building company, and the house building sector is certainly more interested than most in the proposals.
As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said, we are opposed to the measure in its totality, and would prefer it to have been excluded from the Bill. Since coming to office less than a year ago, the Government have now had two bites at the cherry of stamp duty. As my right hon. Friend suggested, one must have serious concerns about where this will lead us. I shall say a little more about that in a moment.
The spin put on the stamp duty announcement during the Chancellor's Budget speech and in most of the press reporting immediately after the Budget was to relate it entirely to houses. Indeed, as my right hon. Friend pointed out, the Chancellor said that the change would leave
98 per cent. of house transactions unaffected".—[Official Report, 17 March 1998; Vol. 308, c. 1110.]
That takes us back to the politics of envy of some 20 years ago—"It's all right, because it will affect only those who have houses worth more than £250,000," the implication being that we should not be too concerned about such people. I draw the Committee's attention to the fact that any arbitrary cut-off level of that nature in relation to house prices already discriminates severely against certain parts of the country.
In my constituency, for example, someone owning a house worth £250,000 is likely to be the kind of industrious manager in a small business whom the Paymaster General is anxious to encourage in his endeavours. I accept that in other parts of the country, someone owning a £250,000 house might genuinely be considered to be a rich and unusual member of the community, but that is not so in the more affluent parts of the south-east.
Since I May 1997, the Government have effectively tripled the stamp duty payable on the transmission of properties worth more than £500,000 and doubled it on properties valued at more than £250,000. If we look further down the house price scale, it is not true to say that the measure will not affect 98 per cent. of houses, because houses have to be built on land. When builders and developers buy land to build even the most modestly priced houses, they will typically buy it in parcels worth more than £500,000. In those circumstances, the Government's action will contribute to house price inflation at the bottom as well as the top end of the scale. Typically, land accounts for a third of the value of a new house, and very much more than that in the south-east. The amendment would specifically exclude business premises from the scope of the stamp duty increase. It is a second-best option if the increase cannot be rescinded altogether. My right hon. Friend the Member for Wells made a persuasive case for, as he put it, the slice system as opposed to the slab system.
Until last year's Budget, most of us regarded stamp duty at 1 per cent. as more of an irritant than a meaningful consideration in a transaction. Now that it is becoming a meaningful consideration, one of our concerns must be the extraordinarily high marginal rates at the change points of £250,000 and £500,000.
The Chancellor recognised quite rightly in his Budget speech, when addressing matters of welfare reform, that high marginal rates have a disastrously distorting effect in the marketplace, sending people all the wrong signals and inspiring inappropriate behaviour. He was referring to marginal rates of withdrawal of 80 or 100 per cent. In respect of a property priced at £499,999, we are discussing a marginal rate of tax of 500,000 per cent. if the sale price increased by £1. The Paymaster General will recognise that, in general terms, that would lead inevitably to distortions in the market, discrete steps and a discontinuity in the curve of the marketplace. My right hon. Friend the Member for Wells has made a sensible and valuable proposal which I hope the Government will consider.
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The measure will have two effects specifically in respect of business property. The first relates to property as a tool or as a piece of working capital in the operation of a business. The Bill will place an additional tax burden on all businesses using property, including factories, shops, offices and warehouses. Estimates show that 75 per cent. of the yield of the increase in stamp duty will come from business—raising £350 million in 1999-2000. That represents a significant additional burden on business. In cash flow terms, the burden will fall on a business purchasing a new property, expanding or building a new factory—just when its cash flow is strained most, as it seeks to expand and to answer the Government's exhortation to invest and create jobs.
The second effect of the measure will be on property as an investment. Property is already by far the most illiquid of the assets held by investment funds, and the Bill will dramatically decrease the liquidity of property. If a fund owns a building that would be expected to sell for £100 million, it must consider that any buyer will have to pay 3 per cent. tax on that transaction—a not

insignificant sum. The measure, if passed, must have an effect on the value of existing property assets held in funds, including pension funds that have already been hit by the Government's change in the treatment of ACT credits last year.
As my right hon. Friend the Member for Wells suggested, there are a number of ways in which more sophisticated operators can seek to avoid the impact of the increase in stamp duty. They include the use of the single-asset property company as a vehicle for the transmission of a property—or perhaps multiple transmissions—avoiding the payment of significant stamp duty on each occasion. The Paymaster General would probably agree that, in general terms, it is undesirable for the tax tail to wag the investment or business decision dog. We are in danger of a multiplicity of methods being employed to avoid the full impact of the measure on business properties, including an increase in the use of single-asset companies and the development of different funding methods for property development to avoid the transmission of ownership and, therefore, a charge to stamp duty.
Any measure that fragments the market into different qualities of assets because of different tax status attaching to them must be negative, as it will damage liquidity in the market and create distortions, adding to the distortions that will already be created by the arbitrary cut-off points at £250,000 and £500,000. The cut-off points are particularly important. They are far too low to affect the behaviour of large property investors and sophisticated developers building in the City of London, but they will affect and determine the behaviour of smaller companies building investment properties, and public authorities building starter industrial units up and down the country.
The Government should not object to the Opposition amendment if their real purpose is to introduce a new regulator into the housing market, as the Chancellor suggested. However, I have my own concerns about the possibility that stamp duty is being ratcheted up from a nominal 1 per cent. to become a significant tax. My concerns lie not so much with the issue of harmonisation of business taxes in Europe, but with the Government's projected preparations for our possible entry into the single currency.
The United Kingdom has a distinctive housing market which is different from that of many of our European Union partner countries. When my right hon. Friend read out a list of countries in the European Union with high rates of property transfer tax, although he was dealing specifically with business property, it occurred to me that there may be a correlation between the high rates of property transfer tax and the relatively low percentage of home ownership in many countries. We would not wish to discourage home ownership in the United Kingdom.
As the Government look towards preparing the United Kingdom for possible entry into a single European currency, the Treasury must be concerned about the peculiar nature of our housing market and the absence in a single currency union of any distinctively British regulator of housing market activity. The Government would not control interest rates. They could find themselves facing a housing market boom in the United Kingdom while overall economic conditions in the European Union indicated relatively lax monetary conditions. In those circumstances, the British Government would find it extremely difficult to control


the housing market in the United Kingdom and certainly would not be able to use the conventional means that have been employed in the past.
I wonder whether the Government are looking at stamp duty as the future method to regulate house price inflation. If so, the British people should be told. We should understand now that the Government propose to increase stamp duty, perhaps to 6 or 7 per cent. as applies in other European Union countries, as their preferred method of regulating the housing market as the United Kingdom prepares for entry into the single currency. If that is the case, the British people should be told.

Mr. St. Aubyn: I share the concern of my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) that there is a hidden agenda in the rise in stamp duty imposed by the Government. It is absolutely right that, in considering the amendment, we ask ourselves whether it goes far enough. Should it not also include an exemption for the housing sector?
At this point, I declare an interest as someone who is affected by both clause 147 and the amendment.
The problem with stamp duty is that, as a regulator of economic activity, it is for any Government what one might term counter-intuitive. Often when a recession looms, the Government's borrowing requirement goes up and it is intuitive and in their interest to cut interest rates. That is easy. But if in such a situation they consider a cut in stamp duty as part of regulating the economy, there will be howls of anguish from some members of any Cabinet. They will ask, "Why are we giving money back to this relatively affluent sector?" and to be told that it is part of the Government's long-term plan to regulate the housing market will not wash with them.
Stamp duty is a one-way street for this Government. They will happily raise it in the good times that they inherited from the previous Conservative Government. However, it will go against all their instincts to contemplate reducing it again if and when—I fear that under this Government, it will be when—a recession hits not only manufacturing, as is happening now, but the property and housing sectors.
The trouble with a tax that is aimed at what we are told is 2 per cent. of residential housing purchases is that it sounds as if it hits only the rich. But in the London economy and, indeed, in the wider economy, there are many businesses and craftsmen who work for those rich clients. A business in which I am much involved often works for clients who own substantial properties. If those properties are hit by a higher rate of stamp duty, not only will their rich owners have less money to spend, but they will be less inclined to move. If they do move, they will probably decide to economise on some of the costs of moving, which would include the more craft-based, refined products that they would otherwise purchase. The Government's policy—their stated policy and their hidden agenda—will hit a specific sector of craftsmen.
We are considering an amendment which would change only the rate on commercial property. As my hon. Friend the Member for Runnymede and Weybridge said, the liquidity of the property market is almost certainly at risk as a result of the proposal. Over the years, there have been attempts to develop a derivative market in commercial property. The threat of the higher rate of stamp duty may act as a spur to such a market. I hope that the Paymaster

General will at least assure us tonight that if such a derivative market in commercial property were to develop, he would regard it not as a tax avoidance device, but rather as a healthy development for efficient investment in this country. If we have taxes that distort investment, we shall have a less efficient economy.
I know that the Paymaster General's own investments relate more to intellectual than to commercial property. Nevertheless, he should recognise that old-fashioned bricks and mortar have their role to play in the running of businesses.
Another aspect of the issue is brown-field sites. We have heard much back-treading by the Government on brown-field sites. Initially, they set modest, unsatisfactory targets for the number of brown-field sites to be developed for residential use. They now want to achieve a target of 60 per cent. That is not enough for an area in Surrey such as I represent, but it is a welcome improvement on their earlier target. Have the Government considered how the rise in stamp duty will affect the attractiveness of brown-field site development? Following the logic of the argument of my hon. Friend the Member for Runnymede and Weybridge, for some businesses, it will be a marginal decision whether they give up their inner-city brown-field site for a residential housing proposal and then have to buy a new commercial site in another part of the town. They may be discouraged by higher stamp duty.
That brings me to the crux of the matter: 3 per cent. stamp duty—an increase of 1 per cent.—may change the positive environment for property investment, although it may be just about bearable. In agreeing the full price, buyers and sellers may agree to suffer the rise between them. If, however, the Government intend to raise stamp duty to continental levels, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) mentioned, the quantity of land available for brown-field site development to meet the country's housing needs will certainly be adversely affected.
Sources suggest that the rate of stamp duty in other countries is much higher. I have heard that in Italy it is 8 per cent., and that in Ireland it reaches up to 9 per cent. Stamp duty at 9 per cent. on brown-field sites in this country would almost certainly be enough to kill any prospect of change in use. That has long-term consequences. It is a good example of how stamp duty can distort the economy.
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Part of the hidden agenda is the fact that the Government took one swipe at pension funds and enjoyed it so much that they want to take another. They took that swipe through changes to corporation tax. By not allowing a tax credit, they in effect introduced a pensions tax. It must alarm some in the Treasury that pension funds can redirect investment into commercial property and thereby increase income and get round part of the problem. The Government told us that they did away with the investment tax credit to encourage companies to keep money in the company rather than give it out in dividends. The hidden agenda behind the increase in stamp duty suggests far more. It is just old-fashioned Labour, seeing a pot of gold and trying to find as many different angles as possible from which it can get its greedy mitts on it.
Even if there is not a derivative market in commercial property, fees for lawyers' advice and accountancy schemes will be paid. That will result in long-term major pension fund investors avoiding the consequences of stamp duty. If the increase is part of a progressive increase in stamp duty, it is fair to say that the Government will find that the amount of revenue attracted will steadily diminish. A law of diminishing returns will apply rapidly to stamp duty. If there are to be high levels of stamp duty, a pension fund will have to think hard before it can justify switching from one commercial property to another in the course of balancing its portfolio.
As my hon. Friend the Member for Runnymede and Weybridge mentioned, the final part of the Government's hidden agenda is convergence in Europe—not just in tax rates and regulation of the economy, but in the very nature of the economy. We have a property-owning democracy, not just for the very rich, but for all levels of society. Many people who have started their own businesses have as their pension fund their company's commercial premises. In order to sell their business, they may intend to retain control of the company's main asset in some form or other and to rent it out. That is a classic way in which businesses change hands. Businesses changing hands is all part of the way in which the economy develops, grows and thrives.
The increase in stamp duty is yet another Labour spanner in the works. It is another way in which attempts to ease the flow of business will be upset by the scale of duty that the Government are imposing—in many ways quite arbitrarily—on those who own commercial property with a value of more than £250,000. It is arbitrary because, in other parts of the Finance Bill, we see a general claim—which we shall examine in more detail later in Committee—that there is an attempt to mitigate the capital taxation of long-term investments. Yet here we have a clear case of the Government imposing a swingeing tax on a long-term capital investment. It shows how far new Labour's actions are divorced from its warm words.

Mr. Gibb: I support the amendment, which seeks to remove from these draconian provisions properties that are subject to the uniform business rate—commercial properties. One of the points that the Chancellor of the Exchequer skated over when announcing the swingeing increase in the rate of stamp duty on high-value properties was that stamp duty also applies to the transfer of commercial property; not just real property, but all assets in a business that are transferred by document. That greatly affects businesses. The notes on clauses make clear that 75 per cent. of the revenue raised will be from sales of businesses and commercial property.

Mr. Hammond: Would I be right in thinking that the measure applies also to transfers of intellectual property, which might be of direct interest to the Paymaster General?

Mr. Gibb: My hon. Friend is right. It applies to all assets of a business, including intellectual property. It can also apply to one's debtors. If a company has any assets transferred by document—cash, even—the stamp duty is applied to the value of those assets
As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said, a large company that takes legal advice from leading solicitors and accountants can avoid paying duty. If it is made clear in the agreement to sell or buy a business that certain assets—for example, plant and machinery and tools—will be transferred not by document but by delivery, the stamp duty is avoided. That requires a company to take legal advice on the sale of a business, but most small and medium businesses will not have the resources to take advice on stamp duty; they will probably be caught more than large companies. A measure designed to raise revenue for the Government will hit the very businesses they purport to want to encourage.
The Institute of Directors has made clear that it opposes this draconian measure, saying:
We deplore the increases in stamp duty on high-value properties. While very few house purchases will be affected, a higher proportion of purchases of business premises (and of goodwill and patents) will be affected.
The Institute of Chartered Accountants deplores the measures; the tax faculty has said that the
further increases in stamp duty for asset transfers as against share transfers may distort business decisions and inhibit sales of assets as against companies.
Here, again, we have a measure designed to hurt medium and small businesses, as against large ones. It will not affect businesses that simply sell shares from one owner to another; they will be subject to a different rate of stamp duty—the rate applying to the transfer of shares—but someone trying to sell a small business because of retirement, for example, will have to pay the very high rates of stamp duty on all the assets transferred.
The IOD makes the valid point that insurance companies, pension funds and property unit trusts will bear the brunt of the direct impact of the increases in stamp duty because most commercial properties are owned by such investors and then leased. Millions of people who invest in insurance, pension funds or unit trusts will suffer.

Mr. Hammond: Will not the measure cause a further distortion—a bias in favour of renting or leasing smaller business premises rather than purchasing them outright and paying the attendant stamp duty?

Mr. Gibb: My hon. Friend is absolutely right. It is wrong that Government measures should have such distortionary effects—the Government should carefully consider the effects of taxes on the market. The distortion of usual commercial transactions is distressing, but it will happen in a variety of areas as a result of the Bill.
The Institute of Directors is concerned that the measure will reduce the value of the investments of millions of innocent investors. That demonstrates a wider point—taxes levied on big business or business generally are always eventually borne by individuals. That has been widely acknowledged, as the Treasury Committee noted. Gavyn Davies said that the brunt of the advance corporation tax credit would be borne by the household sector. Similarly, the brunt of the effects of clause 147 will be borne ultimately by individuals, either as tenants or as purchasers of houses on small estates where the land was bought as a parcel—as my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) rightly pointed out, the 3 per cent. stamp duty would be passed on to the purchaser of the newly built house.
Like my hon. Friends, the Institute of Directors is concerned that nothing has been done to remove the distortions caused by the slab scale. The matter was the subject of an amendment to the Finance Bill in the summer; the Government opposed that amendment, too. As they are doing everything possible to remove distortions in areas such as national insurance, it is odd that they are exacerbating distortions in stamp duty by increasing the rates.
I urge the Government to accept the amendment, which would prevent business from having to face these draconian measures. In his Budget statement, the Chancellor implied that the provisions would apply only to residential property; he made no reference to their effects on commerce and business transactions. For once, let us see legislation living up to the spin and presentation.

Mr. Geoffrey Robinson: Opposition Members have advanced reasoned arguments on the amendment, but I think that they are really saying that they do not like the clause. It would have been much more simple if we had debated the clause as a whole.
The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) mentioned draft regulations. We have checked what happened—they were placed in Derby Gate, in the House of Commons Library and in the House of Lords Library. We are not sure why they were not there when he looked for them—

Mr. Gibb: rose—

Mr. Robinson: I do not doubt that they were not available to him, but I reassure him that we have arranged for additional copies to be deposited—no doubt he will be able to collect them after the Division.

Mr. Gibb: I am grateful for that reassurance, but why were the draft regulations not referred to in the regulations list, in the book that lists all the documents that the Government have presented to the Library, or in today's Order Paper under the list of documents that were placed in the Library on Friday?

Mr. Robinson: I have explained to the hon. Gentleman that the draft regulations were deposited in the Library, although we do not know why they were not available to him. I have assured him that we have made additional copies available. I cannot do more, and I ask him to accept what I have said.
The increased levels of stamp duty will apply to intellectual property, but the amounts will be very small—some tens of millions in the total. I do not think that the matter is significant to our consideration of the amendment—in fact, the amendment would not affect it.
I am sure that the whole House has considerable respect for the professionalism of the hon. Member for Bognor Regis and Littlehampton, but he must find other reference points than the Institute of Directors and Gavyn Davies, much as we respect the latter and much as our relations with the former are improving. I am sure that he can do better than that, even if he has to make frequent reference to his former boss.
We heard about the slice system as against the slab system and the cliff edge. My right hon. Friend the Chief Secretary conceded in the debate on 28 July last year,

when we divided on an amendment, that there were certain deficiencies in the present system, but it is funny that the Conservatives did nothing about it when they were in government.
I hasten to add that rates were lower then, so the problem was slighter, but Conservative Members have made the point today that there was already a bunching. We are prepared to consider the issue, but only in the context of there being no reduction in revenue, so presumably the rates would be spread over a banded system and the results might not be to everyone's liking.
9.30 pm
The Opposition's talk of a hidden agenda is a lot of nonsense. I suppose that they have nothing better to say, but we could have predicted that the right hon. Member for Wells (Mr. Heathcoat-Amory), along with the hon. Members for Guildford (Mr. St. Aubyn) and for Runnymede and Weybridge (Mr. Hammond) and others, would mention the European situation.
In anticipation, I took the trouble of getting some figures on Europe, which I am sure will interest or even intrigue the right hon. Member for Wells. He was pretty right on Belgium; wrong on France and on Germany; and right on the Netherlands. I have the figures here, and I will make them available to him afterwards. Overall, stamp duty and its equivalents in the Community stand at between 6 and 10 per cent. on average, which still puts us at a considerable advantage.
I believe that I am correct in saying that there is no intention that the business properties taxation should bring us in line with the code of conduct of business taxation. We have looked at the market—

Mr. St. Aubyn: rose—

Mr. Robinson: If the hon. Gentleman can contain himself for a moment, I am dealing with a coherent point raised by other Conservative Members in the debate. I agree with the Budget judgment that we have a level of taxation that even he would accept is assimilable in the present market and does not pose a problem.

Mr. St. Aubyn: In the light of the Paymaster General's assertion that to refer to a hidden agenda is nonsense, and of the comments that he has just made, can he confirm that the Government have no intention of raising stamp duty yet further?

Mr. Robinson: The question of a hidden agenda was raised in relation to Europe and to some harmonisation proposals concerning a code of conduct for business taxation. I repeat that that is nonsense. There is no hidden agenda in that respect.

Mr. Hammond: The point was also raised in respect of how the housing market would be regulated under a single currency and of comments made by the Chancellor himself suggesting that a prime motive for the move was a further damping of the housing market.

Mr. Robinson: The hon. Gentleman says that the Chancellor made that remark, and I look forward to receiving a copy of it, if he can produce it.
The issue is not whether the United Kingdom's housing market is out of phase with the European Union's, although that could well happen; the issue is whether there is genuine convergence between our economy and the European economies. That is why the policy that we cannot contemplate entry to the single currency until there is established convergence is so right. Convergence means a general harmonisation of the economies in terms of inflation, growth and other factors, one of which, but only one, is the housing market. We cannot pick out housing and try to deal with it as a separate issue; nor would we attempt to do so.
All the amendments have been odd, as if the Opposition had trouble getting them down or making up their minds what they wanted to do. The odd thing about this amendment is that it would give relief for businesses of over £250,000, but nothing for those under that figure. I do not resent Opposition Members speaking to the amendment. For the most part, their concern seems to have been the effect on the housing market, but the amendment would do nothing about the problems that they consider the increase in stamp duty might pose for that market and we do not accept that it will pose a problem.
The hon. Members for Runnymede and Weybridge and for Guildford are concerned about the housing market and the possible effects of the tax on house building, house prices and land prices, but surely they must have learnt from the 1980s, the Lawson boom and the mishandling of the economy by the Conservative Government that the one thing the property market does not want is the politics of boom and bust. The politics of envy has nothing to do with it—it is the politics of boom and bust. That is what brought the housing market to its knees and what plunged millions into negative equity from which, as I heard today from someone who works in the Treasury, people are still not escaping, in spite of the improvement in the economy.
The whole point about everything that the Government are doing, as I explained during the debate on clause 75, is that stability and long-termism have to be the name of the game. There is no point in going back to boom and bust or trying to regulate one aspect to distort another. We have to have a coherent set of policies that keep the economy on a steady course. That is what the Budget is about and the increase in stamp duty is one part of it.

Mr. St. Aubyn: I am afraid that the hon. Gentleman condemns himself with his own words. On the one hand, he tells us that there is no hidden agenda and that raising stamp duty is not part of regulating the economy, but, on the other, he talks about preventing boom and bust. In the context of house building, surely he realises that it is the transaction costs that are the concern. Increasing transaction costs will deter the development and provision of brown-field sites for residential development.

Mr. Robinson: The hon. Gentleman may continue to make that point, but we believe that we have taken a balanced view. Indeed, a Conservative Member agreed—I cannot remember whether it was the hon. Member for Bognor Regis and Littlehampton or the hon. Member for Runnymede and Weybridge—that, at the present level, the increase will not markedly affect the market. We agree with that judgment and it is the one which we have taken.

The point that I was trying to make about stability, which the hon. Member for Guildford seems to be too dense to understand, is that we are trying to achieve it not through one measure alone, but through a set of measures. The one thing that will kill the housing market again is to get away from stability and go for boom and bust. We must not do that. That is why the whole of the Budget fits together as a coherent set of measures to keep the economy on a steady course, with steady growth, to the benefit of all sectors.
I hope that the right hon. Member for Wells is reassured about the European fund. He also mentioned welfare to work and its having some effect on those companies that we will be looking to to provide considerable effort in that respect. I am pleased to be able to tell him that my right hon. Friend the Chancellor and I met representatives of some big companies in the hotel industry—this is not unrelated to commercial property values—and, while they could give us a tremendous commitment to welfare to work and the developments that they have in hand are extremely encouraging, none of them raised the increases in stamp duty with us. They were committed to welfare to work and very committed to the Government's policy of stability and long-termism.
We are in the right ball park as far as the increase is concerned. Indeed, that is confirmed in the monthly index of Richard Ellis, which shows that the impact is pretty marginal, if there is any at all, and that we are not greatly affecting the market. It also seems that Richard Ellis reviews its Budget judgment as well.

Mr. Hammond: I listened carefully to what the Paymaster General said about long-term stability. Can he explain how two separate stamp duty increases in less than 12 months convey an impression of stability? Either we have to assume that there will be a steady progress and further increases, or those are discrete and disruptive movements.

Mr. Robinson: There has been nothing of significance in the market and no boom such as that which the Conservative party managed to contrive. There is every indication that the economy is on a steady course. We believe that our Budget judgment was right and everything we have done was committed to stability. We shall stick with our policies.
There is no merit in the amendment, which would do nothing to improve the housing market in a way that would have any effect on commercial property. We believe that our judgment is correct and we will make decisions as and when it is proper to do so in the context of the Budget.
If a fit of misguided "Oppositionism" leads the Conservatives to force the amendment to a vote, we shall resist it.

Mr. Heathcoat-Amory: I do not think that the Paymaster General has done justice to the many excellent points raised by my hon. Friends the Members for Bognor Regis and Littlehampton (Mr. Gibb), for Runnymede and Weybridge (Mr. Hammond) and for Guildford (Mr. St. Aubyn), all of whom spoke with considerable theoretical or practical knowledge. The Minister has once or twice completely overlooked their questions.
The Paymaster General did pass the comment that our amendments were confused and asserted that we had had trouble in getting them down. I do not know what he means by that, or how on earth he can know the circumstances in which our amendments were tabled. In fact, we had no difficulty. Our only problem was to try to restrain ourselves from flooding the amendment paper with necessary amendments and to try to concentrate on those that would be constructive and would improve the Bill.
The amendment is crystal clear. We tabled it to try to take out commercial property because we thought that the Government intended that.

Mr. John Swinney: I take it from what the right hon. Gentleman has said that the Opposition amendments will be the pinnacle of their contribution to the debate and that we can expect no better from the other amendments that we will debate over the next two days.

Mr. Heathcoat-Amory: I do not know whether the hon. Gentleman is trying to be witty or to ask a genuine question. If he sticks around for the next two days, he will hear more of our amendments, which I hope he will support because we have in mind not only the United Kingdom, but improvements to the economy of Scotland, which is dear to the hon. Gentleman's heart.
The amendment was tabled, at least partly, because we judged, following the Chancellor's Budget statement, that it could well meet his intention. The Chancellor referred only to increasing stamp duty on householders and we know from last year's Finance Bill that the Government—or, at least, those on the Treasury Bench—did not always understand their legislation. The fiasco of the withdrawal of dividend tax credits made it clear that they certainly did not understand their own Bill. Those of my hon. Friends who served on the Standing Committee will remember that Ministers simply did not understand foreign income dividends. Eventually, rather than withdrawing the relevant clause, they said that it was inoperative and that they would return to it later.
It is possible that, in the rush of preparing a Budget, the Chancellor genuinely thought that stamp duty did not apply to commercial properties. No one had gone into the point in great detail and the Chancellor himself has no commercial background. Perhaps that was a mistake, and we have sought to help him by giving effect to what may have been his intention; otherwise, the Bill will have a very damaging effect on commercial properties. We hope that there will be time for a short debate on clause stand part so that we can make a few more general points about the clause's wider effect on the economy.
I must complain that the Paymaster General was dismissive of my innocent inquiry about whether this might not be the opportunity to move from what I called a slab system to a slice system. I think it was my hon. Friend the Member for Runnymede and Weybridge who picked that up as an important potential reform. All the Paymaster General said was that we should have done it. My point was that it is not so important to have such reforms when the rates are low, but, when the upper rate of stamp duty is increased by 50 per cent., as is proposed, it becomes important to try to avoid such gross distortions.
9.45 pm
There is also the code of conduct for business taxation. Again, the Paymaster General was dismissive and said that, as far as he knew, there was no connection; that is his opinion, but the Government appear to have an agenda to harmonise—upwards, of course—business taxation to fit a European pattern. He challenged my figures on the effective rates of stamp duty in other member states. I defer to his greater knowledge, or at least to his easier access to specialist advice. I had to refer to the Library at short notice and it did a very good job for me, but I may not have got its figures right. However, it is clear, and he confirmed this, that the average rate of property transaction taxes is between 6 and 10 per cent. He confirms my point that we have a comparative advantage. That is one of the reasons why firms transfer to Britain and why we act as a magnet for overseas investment. That is much criticised by members of the European Commission, who regard that as terribly unfair. They are itching to harmonise it all upwards to the higher continental rates. It was not right for the Paymaster General to be so dismissive of my point.
The Paymaster General ignored my question about which sorts of businesses would be hit by the increased stamp duty. I noted—again, this was echoed by several of my hon. Friends—that large, well-advised companies can and do avoid stamp duty by various means. The Paymaster General did not mention that. He knows a great deal about tax avoidance and how to counter it. The Committee would have expected some reference to how he will ensure that the burden of the higher rate of stamp duty is spread evenly through the commercial world rather than, as often happens, being loaded on to the weaker shoulders of small companies that cannot afford professional advice on the scale necessary.
The Paymaster General's responses were inadequate. We may seek answers to some wider questions in the debate that will shortly follow on clause stand part, if it is allowed.

Amendment negatived.

Question proposed, That the clause stand part of the Bill.

Mr. Heathcoat-Amory: The transfer of property is not a luxury but a sign of a dynamic and successful economy, so any tax that inhibits it strikes at the root of productive investment and business activity. In an earlier speech, the Paymaster General suggested that the tax was to bring stability—that it would somehow even out the ebbs and flows of the property market and ensure that we do not have a boom followed by a bust. I do not think that it has anything at all to do with that.
I should believe the hon. Gentleman more if there were some indication that he would lower the rates of stamp duty at another stage in the economic cycle, but, as has been said, it is a ratchet—the direction is ever upward, with no chance whatsoever of the £500 million impost on the commercial sector ever being reversed.
The truth is that the measure is not about stability, but about extra taxation. That sits oddly with the Government's professed desire for a dynamic economy—presumably one in which both foreign and domestic


businesses locate, relocate and start up in or transfer to the United Kingdom. The vigour of the property market is a healthy sign, so to tax property transfers is a retrograde step. What is the reason for the clause? Why are the Government increasing taxes on property and, therefore, on commerce at this time?

Mr. Geraint Davies: Does the right hon. Gentleman accept that, given that the rate of increase in commercial sector property prices is more than twice the rate of inflation, any simple understanding of market systems brings one to the conclusion that there is excess demand in the market and that the rate of increase is far in excess of the marginal increase in tax, which will surely be absorbed in containing the rate of increase in prices? There is no way that the increase will harm the economy—far from it. It will have a stabilising impact.

Mr. Heathcoat-Amory: There are two responses to that interesting intervention. The first is that the increased prices in the commercial sector mean that, even at existing rates of stamp duty, the yield is extremely buoyant. It will increase precisely because of the higher taxes; therefore, the Chancellor did not need to increase the rate in order to increase the yield. The second point follows on from my remarks a few minutes ago, which is that I would only accept such an argument if there were any evidence that the Government would cut the rate again if the commercial property market turned down.
That logically follows on from the hon. Gentleman's point. If the hon. Gentleman indicates that that is indeed his policy in the debate we are about to have—however short it may be—I shall regard his interventions with considerable respect in future. Incidentally, I hope that he is on the Standing Committee on this Bill. He was happily on the Committee on last year's Finance Bill and, having finally got the hang of the different between you and they—the first person and the third person—he was an excellent member of that Committee.
Before that intervention, I was asking the Paymaster General about the reason for the tax. There is no environmental reason; as my hon. Friend the Member for Guildford emphasised, it has nothing to do with the difference between building on green-field or on brown-field sites. There is no apparent reason from a European perspective—the Paymaster General has denied that there is a hidden convergence agenda. Finally, the Government do not need the money, because we are in surplus. A budget surplus was nearly achieved in the financial year just ended and there will be a substantial surplus in the financial year on which we have just embarked. Given that there is already to be a £20 billion tax burden on the commercial sector in the lifetime of this Parliament, why is the Chancellor adding to that unnecessarily by increasing rates of stamp duty that disproportionately hit the business sector?
I conclude with those few questions and comments, hoping to allow one or two of my hon. Friends to make a contribution in time for an early end to the debate.

Mr. St. Aubyn: I begin by applauding the Paymaster General's altruism in proposing the clause. We are near neighbours in Surrey, where he is my constituent.

Whereas I occupy a humble labourer's cottage, he occupies the mansion of the village—very nice it is, too—and I know that, in this case, the tax rate will hurt him a great deal more than it will hurt me. Nevertheless, one is bound to ask, in what spirit is that altruism being proposed?
The Paymaster General says that he is anxious to prevent boom and bust. Well, we do have a boom. In the past two years, the stock market has increased by about 50 per cent., as measured by the increase in the FTSE index. To help us understand the Government's long-term policy, will the Paymaster General clarify why his Government are happy to preside over a boom in financial assets as represented by shares, but have an engrained hostility to any increase in the value of bricks and mortar in so far as they, too—especially on the commercial property side—represent a financial asset?
We need to know the answer to that question, when the Paymaster General has told us that he believes that 3 per cent. is about right, and has pretty well implied tonight that stamp duty should not go higher than that, and yet he stops short of giving the House any reassurance that he and the Government recognise that if they try to push this boat out any further, the harmful effects—which we have identified this evening—on the property market, especially the commercial property market, will become very marked.
The property-owning democracy is a decent society—there is nothing to be ashamed of in it—but I believe that we have isolated all the possible motives that the Government have for introducing clause 147, and in the end we must conclude that the motivation for the clause comes back to old Labour. It comes back to an old-fashioned attack on property. That is what will drive Labour Members through the Aye Lobby tonight.

Mr. Geoffrey Robinson: My reply will be brief. In your absence, Mr. Lord, and that of your iron discipline, we had a fairly wide debate on amendment No. 10. A debate on an amendment relating to commercial property was turned into one on the housing market, and Opposition Members expressed much anxiety.
It remains only for me to say, as we near the end of the first day's debate in Committee of the whole House, that there is no hidden agenda regarding the increase in stamp duty, and that no European convergence idea underlies it. The obsession of the right hon. Member for Wells (Mr. Heathcoat-Amory) with anything that might smack of Europe is well known to the House and he is respected by many for it, but he must not let that obsession overreach itself by imagining things where, obviously, none exist.
I assure the hon. Member for Guildford (Mr. St. Aubyn) that I am not—sadly or happily—his constituent; that we have no hostility to financial assets; that we are pleased by the sustained confidence shown by the markets in the Labour Government; that we are sure that that will continue; and that we are delighted that property-owning democracy is also continuing, as polls show, to support this Labour Government.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 285, Noes 119.

Division No. 257]
[9.58 pm


AYES


Abbott, Ms Diane
Dobbin, Jim


Adams, Mrs Irene (Paisley N)
Donohoe, Brian H


Ainger, Nick
Doran, Frank


Ainsworth, Robert (Cov'try NE)
Dowd, Jim


Alexander, Douglas
Drew, David


Allan, Richard
Drown, Ms Julia


Allen, Graham
Eagle, Angela (Wallasey)


Anderson, Janet (Rossendale)
Eagle, Maria (L'pool Garston)


Armstrong, Ms Hilary
Edwards, Huw


Ashton, Joe
Ellman, Mrs Louise


Atkins, Charlotte
Ennis, Jeff


Ballard, Mrs Jackie
Etherington, Bill


Bayley, Hugh
Ewing, Mrs Margaret


Begg, Miss Anne
Fatchett, Derek


Bell, Stuart (Middlesbrough)
Fearn, Ronnie


Benn, Rt Hon Tony
Fisher, Mark


Bennett, Andrew F
Flynn, Paul


Benton, Joe
Foster, Rt Hon Derek


Best, Harold
Foster, Michael Jabez (Hastings)


Blackman, Liz
Foster, Michael J (Worcester)


Blizzard, Bob
Foulkes, George


Borrow, David
Fyfe, Maria


Bradley, Peter (The Wrekin)
Galloway, George


Bradshaw, Ben
Gardiner, Barry


Brinton, Mrs Helen
George, Bruce (Walsall S)


Brown, Rt Hon Nick (Newcastle E)
Gerrard, Neil


Brown, Russell (Dumfries)
Gibson, Dr lan


Bruce, Malcolm (Gordon)
Godman, Dr Norman A


Burden, Richard
Godsiff, Roger


Burgon, Colin
Golding, Mrs Llin


Butler, Mrs Christine
Gorrie, Donald


Byers, Stephen
Griffiths, Jane (Readings E)


Campbell, Alan (Tynemouth)
Griffiths, Nigel (Edinburgh S)


Campbell, Mrs Anne (C'bridge)
Hall, Mike (Weaver Vale)


Campbell, Menzies (NE Fife)
Hall, Patrick (Bedford)


Campbell, Ronnie (Blyth V)
Hanson, David


Campbell—Savours, Dale
Harris, Dr Evan


Canavan, Dennis
Heal, Mrs Sylvia


Cann, Jamie
Health, David (Somerton & Frome)


Casale, Roger
Henderson, Ivan (Harwich)


Caton, Martin
Hepburn, Stephen


Chapman, Ben (Wirral S)
Heppell John


Chisholm, Malcolm
Hoey, Kate


Clark, Rt Hon Dr David (S Shields)
Home Robertson, John


Clark, Dr Lynda (Edinburgh Pentlands)
Hood, Jimmy



Hoon, Geoffrey


Clark, Paul (Gillingham)
Hopkins, Kelvin


Clarke, Charles (Norwich S)
Howarth, Alan (Newport E)


Clarke, Eric (Midlothian)
Howells, Dr Kim


Clelland, David
Hoyle, Lindsay


Clwyd, Ann
Humble, Mrs Joan


Cohen, Harry
Hurst, Alan


Coleman, lain
Hutton, John


Connarty, Michael
Iddon, Dr Brian


Cook, Frank (Stockton N)
Illsley, Eric


Corbyn, Jeremy
Jackson, ms Glenda (Hampstead)


Cotter, Brian
Jackson, Helen (Hillsborough)


Cousins, Jim
Jenkins, Brian


Crausby, David
Johnson, Alan (Hull W & Hessle)


Cryer, Mrs Ann (Keighley)
Johnson, Miss Melanie (Welwyn Hatfield)


Cummings, John



Cunliffe, Lawrence
Jones, Barry (Alyn & Deeside)


Cunningham, Jim (Cov'try S)
Jones, Ieuan Wyn (Ynys Môn)


Dalyell, Tam
Jones, Ms Jenny


Darling, Rt Hon Alistair
(Wolverh'ton SW)


Darvill, Keith
Jones, Jon Owen (Cardiff C)


Davidson, lan
Jones, Martyn (Clwyd S)


Davies, Rt Hon Denzil (Llanelli)
Kaufman, Rt Hon Gerald


Davies, Geraint (Croydon C)
keeble, Ms Sally


Davis, Terry (B'ham Hodge H)
keen, Ann (Brentford & Isleworth)


Dean, Mrs Janet
Kennedy, Jane (Wavertree)


Denham, John
Kidney, David


Dewar, Rt Hon Donald
Kilfoyle, Peter





King, Andy (Rugby & Kenilworth)
Raynsford, Nick


Kingham, Ms Tess
Reed, Andrew (Loughborough)


Kirkwood, Archy
Reid, Dr John (Hamilton N)


Kumar, Dr Ashok
Rendel, David


Ladyman, Dr Stephen
Robertson, Rt Hon George (Hamilton S)


Lawrence, Ms Jackie



Laxton, Bob
Robinson, Geoffrey (Cov'try NW)


Lepper, David
Roche, Mrs Barbara


Leslie, Christopher
Rogers, Allan


Levitt, Tom
Rooker, Jeff


Livingstone, Ken
Roy, Frank


Llwyd, Elfyn
Ruane, Chris


Lock, David
Ruddock, Ms Joan


Love, Andrew
Russell, Bob (Colchester)


McAllion, John
Sanders, Adrian


McAvoy, Thomas
Sarwar, Mohammad


McCabe, Steve
Savidge, Malcolm


McCafferty, Ms Chris
Sawford, Phil


McCartney, lan (Makerfield)
Sedgemore, Brian


McDonnell, John
Sheerman, Barry


McFall, John
Sheldon, Rt Hon Robert


McGuire, Mrs Anne
Simpson, Alan (Nottingham S)


McIsaac, Shona
Skinner, Dennis


McKenna, Mrs Rosemary
Smith, Rt Hon Andrew (Oxford E)


Mackinlay, Andrew
Smith, Angela (Basildon)


McNamara, Kevin
Smith, Miss Geraldine


McWilliam, John
(Morecarnbe & Lunesdale)


Mallaber, Judy
Smith, John (Glamorgan)


Marsden, Gordon (Blackpool S)
Smith, Sir Robert (W Ab'd'ns)


Marshall, David (Shettleston)
Spellar, John


Marshall—Andrews, Robert
Squire, Ms Rachel


Maxton, John
Starkey, Dr Phyllis


Meacher, Rt Hon Michael
Steinberg, Gerry


Merron, Gillian
Stevenson, George


Michael, Alun
Stewart, David (Inverness E)


Michie, Bill (Shef'ld Heeley)
Stewart, lan (Eccles)


Michie, Mrs Ray (Argyll & Bute)
Stinchcombe, Paul


Milburn, Alan
Stott, Roger


Mitchell, Austin
Strang, Rt Hon Dr Gavin


Moffatt, Laura
Straw, Rt Hon Jack


Moonie, Dr Lewis
Stringer, Graham


Moran, Ms Margaret
Stuart, Ms Gisela


Morgan, Ms Julie (Cardiff N)
Stunell, Andrew


Morgan, Rhodri (Cardiff W)
Swinney, John


Morris, Ms Estelle (B'ham Yardley)
Taylor, Rt Hon Mrs Ann (Dewsbury)


Morris, Rt Hon John (Aberavon)



Mudie, George
Taylor, Ms Dari (Stockton S)


Murphy, Denis (Wansbeck)
Thomas, Gareth (Clwyd W)


Murphy, Jim (Eastwood)
Thomas, Gareth R (Harrow W)


Murphy, Paul (Torfaen)
Timms, Stephen


O'Brien, Bill (Normanton)
Tipping, Paddy


O'Brien, Mike (N Warks)
Touhig, Don


Olner, Bill
Trickett, Jon


O'Neill, Martin
Truswell, Paul


Organ, Mrs Diana
Turner, Dennis (Wolverh'ton SE)


Osborne, Ms Sandra
Turner, Dr Desmond (Kemptown)


Palmer, Dr Nick
Turner, Dr George (NW Norfolk)


Pearson, lan
Twigg, Derek (Halton)


Perham, Ms Linda
Tyler, Paul


Pickthall, Colin
Vaz, Keith


Pike, Peter L
Walley, Ms Joan


Plaskitt, James
Welsh, Andrew


Pope, Greg
White, Brian


Pound, Stephen
Williams, Rt Hon Alan


Powell, Sir Raymond
(Swansea W)


Prentice, Ms Bridget (Lewisham E)
Williams, Alan W (E Carmarthen)


Prentice, Gordon (Pendle)
Williams, Mrs Betty (Conwy)


Primarolo, Dawn
Willis, Phil


Prosser, Gwyn
Wise, Audrey


Purchase, Ken
Wood, Mike


Quin, Ms Joyce
Wright, Anthony D (Gt Yarmouth)


Quinn, Lawrie



Radice, Giles
Tellers for the Ayes:


Rammell, Bill
Mr. Clive Betts and


Rapson, Syd
Mr. David Jamieson.






NOES


Ainsworth, Peter (E Surrey)
Lait, Mrs Jacqui


Arbuthnot, James
Lansley, Andrew


Atkinson, David (Bour'mth E)
Leigh, Edward


Atkinson, Peter (Hexham)
Letwin, Oliver


Baldry, Tony
Lidington, David


Bercow, John
Lilley, Rt Hon Peter


Beresford, Sir Paul
Lloyd, Rt Hon Sir Peter (Fareham)


Boswell, Tim
 Loughton, Tim


Brazier, Julian
Lyell, Rt Hon Sir Nicholas


Browning, Mrs Angela
MacGregor, Rt Hon John


Bruce, lan (S Dorset)
McIntosh, Miss Anne


Cash, William
MacKay, Andrew


Chapman, Sir Sydney (Chipping Barnet)
Maclean, Rt Hon David



McLoughlin, Patrick


Chope, Christopher
Madel, Sir David


Clappison, James
Malins, Humfrey


Clark, Rt Hon Alan (Kensington)
Maples, John


Clarke, Rt Hon Kenneth (Rushcliffe)
Maude, Rt Hon Francis



Mawhinney, Rt Hon Sir Brian


Clifton—Brown, Geoffrey
May, Mrs Theresa


Collins, Tim
Moss, Malcolm


Colvin, Michael
Nicholls, Patrick


Cormack, Sir Patrick
Ottaway, Richard


Gran, James
Page, Richard


Curry, Rt Hon David
Paice, James


Davies, Quentin (Grantham)
Paterson, Owen


Davis, Rt Hon David (Haltemprice)
Pickles, Eric


Day, Stephen
Prior, David


Dorrell, Rt Hon Stephen
Randall, John


Duncan, Alan
Redwood, Rt Hon John


Duncan Smith, lain
Robathan, Andrew


Emery, Rt Hon Sir Peter
Robertson, Laurence (Tewk'b'ry)


Evans, Nigel
St Aubyn, Nick


Faber, David
Sayeed, Jonathan


Fabricant, Michael
Shephard, Rt Hon Mrs Gillian


Fallon, Michael
Simpson, Keith (Mid—Norfolk)


Forth, Rt Hon Eric
Smyth, Rev Martin (Belfast S)


Fraser, Christopher
Soames, Nicholas


Gale, Roger
Spelman, Mrs Caroline


Garnier, Edward
Spring, Richard


Gibb, Nick
Steen, Anthony


Gill, Christopher
Swayne, Desmond


Gillan, Mrs Cheryl
Syms, Robert


Gorman, Mrs Teresa
Tapsell, Sir Peter


Gray, James
Taylor, lan (Esher & Walton)


Green, Damian
Taylor, John M (Solihull)


Greenway, John
Taylor, Sir Teddy


Grieve, Dominic
Townend, John


Hamilton, Rt Hon Sir Archie
Tredinnick, David


Hammond, Philip
Viggers, Peter


Heald, Oliver
Wardle, Charles


Heathcoat—Amory, Rt Hon David
Widdecombe, Rt Hon Miss Ann


Hogg, Rt Hon Douglas
Wilkinson, John


Horam, John
Wilshire, David


Hunter, Andrew
Winterton, Mrs Ann (Congleton)


Jack, Rt Hon Michael
Winterton, Nicholas (Macclesfield)


Jackson, Robert (Wantage)
Woodward, Shaun


Johnson Smith,
Yeo, Tim


Rt Hon Sir Geoffrey
Young, Rt Hon Sir George


Key, Robert



King, Rt Hon Tom (Bridgwater)
Tellers for the Noes:


Kirkbride, Miss Julie
Mr. John Whittingdale and


Laing, Mrs Eleanor
Mr. Nigel Waterson.

Question accordingly agreed to.

Clause 147 ordered to stand part of the Bill.

To report progress and ask leave to sit again.—

[Mr. McFall.]

Committee report progress; to sit again tomorrow.

PETITION

Cannabis (Medical Use)

Dr. Brian Iddon: I wish to present a petition signed by several hundred citizens of the United Kingdom, whose signatures were collected in just a few hours by Your Health magazine. The petition is considered to be representative of the feelings of millions of people across the UK. It calls for the legalisation of cannabis for medical use. The petitioners therefore request that the House of Commons gives serious consideration to that proposal.

To lie upon the Table.

Venezuela

Motion made, and Question proposed, That this House do now adjourn.—[Mr. McFall.]

Mr. George Galloway: I am conscious of the long and close relations between the United Kingdom and the Republic of Venezuela. If, in the land of the blind, the one-eyed man is king, in the long, troubled history of Latin American dictatorship, Venezuela' s relative freedom, democratic rights and respect for the rule of law suggest that that country is not some grim prison state or jack boot-ruled banana republic. That makes it all the more disturbing that I must bring before the House this evening the shocking case of two of my constituents, Vanessa Cross and Andrew McLachlan, who suffered a horror at machine gun point at the hands of members of the military of Venezuela that could have been a particularly gruesome scene from an Oliver Stone film or a Graham Greene novel.
On 31 March 1995, my constituents, lured by the glossy Venezuelan holiday brochures, were camping in an organised group at Playa Arapito. The camp was quiet, most of the tourists had gone to bed, and my constituents were asleep in their tent. They were awoken by the barrels of two machine guns pointing through the entrance of their tent. Two crop-haired, camouflage-uniformed Venezuelan soldiers started a nightmare which, for Vanessa and Andrew, continues to this day.
Andrew was beaten and pistol whipped, and held at gun point, while Vanessa was taken outside and raped by both men. When I saw her last Saturday at my surgery, it was clear that the incident had marked and disfigured the life of that young woman in the same way as a hideous scar across her face might have done. She told me that she thinks about it every day and that her relationship with Andrew, her fiancé, has suffered greatly. She lives in fear—fear of travelling, fear of being alone and fear of men. Andrew is severely traumatised, too, not just living with the memory of looking down the barrel of an automatic weapon, but plagued by massive pangs of guilt that he was unable to come to the defence of his fiancée.
This case has been in front of the Foreign Office and the Venezuelan authorities since March 1995—more than three years ago. It was first raised by the noble Lord Watson, formerly the hon. Member for Glasgow, Central and the couple's Member of Parliament at the time. Lord Watson doggedly pursued justice, writing letters, having meetings and all the time seeking to encourage the Venezuelan authorities to bring the criminals before the courts in order to secure some kind of apology and compensation for the couple. He pressed, too, for our man in Caracas to be more proactive in bringing the matter to a proper conclusion. Alas, all his efforts failed—as have all of my own. That is why I am forced to bring the matter to the Floor of the House this evening.
This rape in Arapito was not just a grave crime in itself; it was followed by calamitous incompetence or, worse, wilful negligence on the part of the Venezuelan authorities, which raises important political questions. Immediately after the assault, my constituents alerted their tour leader, who drove them and the rest of the touring party to the municipal police in Puerta La Cruz. Vanessa was advised by the police there to take a shower in a

nearby hotel and reassured that any forensic evidence would be present for up to 14 days following the attack. Alas, she now knows that that was not true.
Vanessa spoke to the police, describing the uniforms and the guns of the perpetrators. The police told her that the attackers sounded like military men from a nearby base, but no formal statement was taken. No one returned to the scene of the crime and no one pursued her attackers. One policeman told her tour leader, Alison Beck, a fluent Spanish speaker, that nothing would be done and no investigation would be carried out. He advised her that the best thing she could do would be to try to get the story into the local newspaper, El Tiempo.
Vanessa was seen on the morning of 1 April by the PTJ, the special branch police. She gave three statements to three different people, one of whom also expressed the view that he was certain that the attackers were soldiers from the nearby military base and that he felt that no action would be taken. She was given an appointment card to see a forensic doctor in the afternoon. He refused to see her because his nurse was not present—even though Andrew and the tour leader, Alison, had accompanied her. When she persisted and explained that she was leaving the next day for Caracas, the doctor shouted at her and threw her out of the clinic. Vanessa was shocked and appalled: a guest in Venezuela, her life threatened, brutally raped by two men and then treated like this by a doctor.
Vanessa eventually saw a forensic doctor on 3 April—three days after the attack. Almost unbelievably, while she was being examined by the doctor, he invited a group of medical students to witness the examination. As she said at the time, "Did not these people realise how violated and humiliated I already felt?"
It should not have been difficult—if there had been a willingness to do so—to track down two military men who were outside their base at 1 am armed with machine guns. In fact, no one really tried. All the evidence seems to suggest that no one really tried because of the fear among civilian and even police authorities of the all-powerful military, which menaces democracy and the rule of law in Venezuela.
Vanessa told me on Saturday, "I continue to have terrifying flashbacks of the attack and not a day has gone by without me having to relive the experience. This is something that I have learnt will never go away."
The performance of our embassy in Caracas in this affair has not satisfied either Lord Watson or me, or Andrew McLachlan, a British citizen. For a time, I had the horrible feeling that the apparent lack of concern and urgency on the part of our embassy might be because Vanessa is a New Zealand national. However, Vanessa has British patriality, her grandfather having been British. She lives and works in Britain with a British citizen, Andrew McLachlan. The New Zealand authorities have no embassy in Venezuela, their interests being looked after by the embassy of Great Britain.
I have a letter dated 24 April 1995 written by our consul in Caracas, which pointedly warns Vanessa that she should be aware that
should she wish to proceed with the case"—
it is an extraordinary proposition that she might not wish to proceed with it—
she should be aware that she will be required to appear in person, together with Andrew, to recount the evidence.


The consul adds,
I have been advised that Venezuela will not accept a proxy.
Vanessa and Andrew have made it clear to me that the embassy clearly conveyed to them that if they wished to proceed, they would be doing so very much on their own. To stick around in Venezuela indefinitely and expensively—a country where the police and the justice system had already been found to be severely wanting—was an unappealing prospect and the couple returned home.

Mr. Keith Vaz: The House will have been shocked to hear of the events in Venezuela concerning two of my hon. Friend's constituents. He will be aware that two of my constituents, Paul Loseby and James Miles, have been in Venezuela over the past year. They were convicted of a criminal offence without having attended their own trial or knowing when the trial was taking place. Does not my hon. Friend's case show that the system of justice and of investigation of offences in Venezuela is deplorably flawed?

Mr. Galloway: My hon. Friend makes the very fair point that Venezuela is not what it is cracked up to be. It is not as it likes to portray itself and not as the world generally thinks of it. Both these cases raise serious questions.
The couple returned home, hoping against hope that the embassy that we maintain in Caracas would look after their interests. That hope has been dashed. Both Lord Watson and I held meetings in London with his excellency the ambassador of Venezuela, who sincerely told us that herculean efforts were being made in Venezuela to find the culprits. He told us that all manner of special task forces and committees had been drafted in to crack this case. By this time, I have no confidence in those efforts or arrangements.
I ask the Government to press for an apology to Vanessa Cross and Andrew McLachlan, not only for the horror of the experience, but for the appalling police and forensic medical work that followed it. I want the Government to energise our diplomatic staff in Venezuela to harry the authorities there until the culprits are found. I want the British Government to raise with the Venezuelan Government the possibility of compensation for my constituents for the horrifying and on-going nightmare that they have had to endure now for more than three long years.

The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): I thank my hon. Friend the Member for Glasgow, Kelvin (Mr. Galloway) for bringing this matter to the attention of the House. I extend to his constituents all our sympathy for the events that have taken place. I hope that my hon. Friend will allow me to take up a point made by my hon. Friend the Member for Leicester, East (Mr. Vaz). Having done so, I shall return to the case of Vanessa Cross.
My hon. Friend the Member for Leicester, East referred to his constituents, James Miles and Paul Loseby. The House will recall that he raised the matter last year and that he expressed particular concern about the Venezuelan

legal system. The Government shared my hon. Friend's concerns, especially that relating to the possibility that people could be tried and sentenced in their absence. As he pointed out on that occasion, there is no agreement on the transfer of prisoners between the United Kingdom and Venezuela, and it might be useful if I take this opportunity to update my hon. Friend on the current situation.
As my hon. Friend knows, we are keen to negotiate an agreement, and we first approached the Venezuelan authorities in 1994. The Prison Service here, which has overall responsibility for prison transfer matters, was unhappy with the draft text proposed by the Venezuelans, and talks on the subject were suspended at that stage.
On 17 February, we asked the Venezuelans for their views on accession to the Council of Europe convention on the transfer of sentenced prisoners. Our embassy in Caracas has been informed that the Venezuelan Minister of Foreign Affairs has sent a recommendation to the Venezuelan Congress to accede to the convention. My hon. Friend will be pleased by that news, as he will also be pleased to know that a member of the Foreign Office's consular division met a Venezuelan Opposition Member of Parliament who has been involved in the case to which my hon. Friend referred. That was an opportunity to discuss the convention. He undertook to do what he could to raise the profile of the convention among parliamentarians. The Under-Secretary of State for the Home Department, my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth), also raised the subject when the Venezuelan Minister with responsibility for drugs visited the United Kingdom in November last year. From that information, my hon. Friend the Member for Leicester, East will appreciate that we are active on this issue, and we hope that we may well persuade the Venezuelans to accede to the European convention on the transfer of sentenced prisoners.
I deal now with the sad case that my hon. Friend the Member for Kelvin has brought before the House. I am grateful that he has taken the time to bring the matter to our attention and that he has dealt with it in such a sensitive and delicate manner. I emphasise at the outset that the protection of the rights of British nationals overseas is something which the Foreign and Commonwealth Office takes very seriously. More than 10 million Britons live and work around the world. Others travel as tourists, making more than 40 million trips abroad each year. The protection of our citizens overseas is a front-line responsibility of the Foreign and Commonwealth Office, 24 hours a day and world wide. Our job is to do everything in our power to safeguard the interests of all those British citizens.
My hon. Friend set out the case of Vanessa Cross and Mr. McLachlan, and there is no reason for me to repeat the facts that my hon. Friend presented to us as they are without question. He may be interested to know that our embassy in Caracas was first notified of the attack a couple of weeks after it took place. The embassy immediately made every effort to contact Ms Cross and Mr. McLachlan who, by that time, had moved on with the group to Colombia.
Messages were left at the hotel, offering any help that might be needed at that stage. Ms Cross and Mr. McLachlan did not get in touch, and we understand the reasons explained by my hon. Friend. The Foreign


Office then contacted the tour operator, directly asking it to pass on our assurances that we were available and ready to offer any assistance that might be needed.
As my hon. Friend said, on returning to the United Kingdom, Ms Cross contacted Lord Watson, who was then the hon. Member for Glasgow, Central. His inquiries about the case in June 1996 were followed up promptly by the Foreign Office's consular division. Let me put on record my thanks for the way in which the noble Lord Watson pursued the case. It was typical of the way in which he carried out his responsibilities as a Member of Parliament and it is a great honour for the other place to have him as a member.
Since then, as my hon. Friend knows, our embassy has sent a number of written notes to the Venezuelan Ministry for Foreign Affairs, requesting information about the progress of the investigation. Last August, we were informed that, although the case had not reached a conclusion, investigations would continue. We made further inquiries in February this year, but, at that stage, they yielded no further information.
My hon. Friend mentioned the relationship between the United Kingdom and New Zealand in respect of the case and the way in which our responsibilities have been carried out. We have worked closely with the New Zealand Government and particularly with New Zealand house in London. There is a close relationship and a joint interest, and we shall continue to pursue the matter jointly. With respect to my hon. Friend, the fact that there is a question whether Vanessa Cross has New Zealand nationality or whether, through patriality, she is a United Kingdom citizen is irrelevant in terms of the way in which the matter has been pursued. We shall continue to keep in touch with New Zealand house and the New Zealand authorities.
I hope that, briefly, I have been able to set out what we have done and our aims in respect of the case that my hon. Friend has raised, and I am delighted to tell him that there are substantial signs of progress according to information that we have received only this evening. The embassy in Caracas has been in contact with the newly appointed Executive Secretary of the Human Rights Commission in Venezuela. He has pursued the case actively and we have just been informed that the local police now have suspects. We understand that the next step is for Vanessa Cross to identify them in person. Our embassy in Caracas is following that up with the Venezuelan Foreign Ministry to establish exactly what is required.
I do not need to say much more to my hon. Friend except to make two final points. First, we are all delighted by the news. I cannot flesh it out in any greater detail in terms of whether charges have been laid or the extent of the success of the investigations. Secondly, we shall be making contact with Vanessa Cross. We shall do what we can to assist in the case and, as we have tried to do throughout, we shall handle the case sensitively.
I do not want to reach a premature judgment, but it seems from the information that we have received as late as this evening that dramatic progress has been made. We hope that what we have heard this evening turns out to be a real breakthrough in the case. If it is, it will be good news for my hon. Friend's constituents. I certainly promise to keep in touch with my hon. Friend and both his constituents and, hopefully, we shall bring the matter to a successful conclusion.

Question put and agreed to.

Adjourned accordingly at twenty-seven minutes to Eleven o'clock.